Airport contracts could be capped at 2 per company
POLICY REVIEW Move comes after Adani won all six airport contracts last year
NEWDELHI: Private bidders, vying for future airport privatisation projects, are likely to be restricted to a maximum of two in each round of auction, two government officials said.
The proposed rules are set to be implemented before the next round of airport privatisation that the government is planning, the officials said, requesting anonymity.
“A list of projects to be bid out in the near future and the modalities of the auction will be finalised very shortly. Discussions are on in the direction of limiting award of concessions to two per developer,” said one of the officials.
The review of the rules comes after Adani Enterprises Ltd, the company controlled by billionaire Gautam Adani, snapped up all six contracts for upgrading airports in 2019 despite having no experience in running them. This, the government believes, has made it vulnerable to accusations by opposition parties of favouring a particular business.
The idea, officials explained, is to ensure that privatising civil aviation infrastructure in the fast-growing domestic market steers clear of political controversies.
Although airport development concessions are awarded through a process of competitive bidding to private players who take the investment risk of redeveloping facilities, officials concede that the government is being extra cautious because it does not want the modernisation process to be disrupted by legal challenges.
“Limiting the number of projects to be awarded to one player in an auction seems to be a fair approach as there will not be a dependence on a few groups,” Anupama Arora, vice president and sector head of corporate ratings at ICRA Ltd, said, adding that it is also important to have experienced airport operators as part of the consortiums that are modernizing them.
The government plans to privatize about 30-35 airports in the country in phases over the next five years. These, along with the greenfield projects to be initiated in the same period, will see about ₹1.4 trillion of investments flowing into airport infrastructure, according to government estimates.
Indian airports operations are now dominated by the state-run Airports Authority of India (AAI). The ambitious privatisation plan, under which the right to manage airports will be granted for about 50 years based on a revenue share (per passenger) model, is part of the government’s efforts to attract investments, add new jobs and meet growing demand.
Currently, about 25 of the 50 busiest airports in the country operate at near-full capacity. The government is aiming to connect smaller cities by building new airports and upgrading existing ones.
Last year, the government initiated privatisation of six airports in which Adani Enterprises emerged as the highest bidder in terms of revenue per passenger to be shared with the AAI. Letters of award have been issued in the case of Ahmedabad, Lucknow and Mangaluru airports to the highest bidder. The awarding of operation, management and development rights in the case of three others—Jaipur, Guwahati and Thiruvananthapuram airports—which got delayed due to various issues, is being resolved.
“Awarding of airports through competitive bidding is a transparent affair. There is nothing wrong in one investor winning more than one project, but it is the government’s discretion to set norms,” said Dhiraj Mathur, a former civil servant and senior adviser, sustainable infrastructure, at PTC India Financial Services Ltd.