Centre plans to privatise 11 airports in five bundles

The government is planning to privatise 11 airports in the country by grouping them into five bundles with the aim of subsidising smaller airports with the earnings of larger ones to make them sustainable in the long term.

The five bundled airports are: Amritsar and Kangra-Gaggal; Varanasi, Gaya and Kushinagar; Bhubaneswar and Hubballi; Raipur and Aurangabad; and Tiruchirappalli and Tirupati, according to the minutes of an August 4 meeting of the Public Private Partnership Appraisal Committee (PPPAC). Central sector Public-Private Partnership (PPP) projects above ₹250 crore have to get an appraisal from the PPPAC, which is chaired by the secretary, department of economic affairs.

The committee gave an in-principle nod to the proposal of the civil aviation ministry to bundle the airports and award each grouping to a single concessionaire under the PPP model to develop world-class airport infrastructure, the document showed. “The bundling seeks to enhance the long-term sustainability of smaller airports through cross-subsidisation from the revenues of larger airports,” the minutes said.

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In 2018-19, the government privatised six airports operated by the Airports Authority of India under the Public Private Partnership model. The Adani Group emerged as the winning bidder for all six airports – Ahmedabad, Lucknow, Mangaluru, Jaipur, Thiruvananthapuram, and Guwahati.

In response to observations by the chair, the aviation ministry said the number of airport bundles that may be awarded to a single bidder would be capped to “mitigate the risks arising from market concentration and potential over- leveraging, including their possible cascading impact across projects,” the minutes showed. The details of the cap are being worked out and would be submitted as part of the proposal for a final PPPAC clearance, the document said.

In response to another observation by the department of expenditure, the aviation ministry said that it was proposed to permit participation by bidders with relevant cross-sectoral infrastructure experience, not just in the aviation sector.

For the present round, AAI adopted a phased and data-driven approach to identify airports suitable for PPP and bundling, as per the minutes of the meeting.

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“Initially, 12 major airports were assessed based on passenger traffic, land availability and commercial potential, financial performance, and airport-specific strengths and constraints, of which six were recommended for leasing. Subsequently, 136 smaller airports were evaluated for possible bundling with the major airports, based on parameters including traffic potential, capital expenditure requirements, geographical proximity, city-side development potential and financial viability,” the document stated.

Under the proposed arrangement, it stated, the private concessionaire will be responsible for the operation, management, and development of the airports, including passenger terminals and city-side infrastructure. The concession period will be 50 years.

AAI, however, will continue to provide air traffic control and communication, navigation, and surveillance services. It also stated that AAI’s wholly owned subsidiary, AAI Cargo Logistics and Allied Services Company Ltd (AAICLAS), will continue to undertake cargo operations.

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As per the document, the proposal also provides for a one-year joint management period involving existing AAI employees, after which the concessionaire will be required to retain 60% of AAI employees for up to three years.

Before seeking the PPPAC’s final recommendation, MoCA will conduct a market-sounding exercise with infrastructure players to assess their response to the proposed bundling arrangement, according to the document.

AAI will also review feedback from private operators, which may result in modifications to the proposal, it said.