Don’t Fly off Tarmac

Context: Privatization of airports in India has been the most successful across the globe. But more steps are required to ensure widening and deepening of aviation infrastructure.

Positive implications of Privatization of airports in India

• Provided needed capital expenditure: The government privatized six of its best Airports Authority of India (AAI) brownfield airports — Ahmedabad, Jaipur, Guwahati, Lucknow, Trivandrum and Mangalore. 
• It helped deepen and widen airport infrastructure in tier 2 and 3 towns.
• Enabling New Players: Government has eased the criteria and approach to incentivize airport infrastructure development through - 

• Removal of airport operator experience.
• Transparent bidding process with revised bid terms to attract global players.

• De-risking Capex payment being made to AAI in case of disallowance by the Airports Economic Regulatory Authority(AERA).
• The financial criterion is based on payment per passenger growing at inflation and traffic growth as opposed to a percentage of revenue earlier. 

• Less Government Intrusion: There is no equity or board representation by government, promising less intrusion in daily operations. 
• Tariff Regulation: Airports tariff fixation is done by AERA and therefore safeguards from abnormal profits by the operator under the garb of excessive airport charges.

Way Ahead: 

• Separating good airports from bad ones: Bundling of profit-making airports with small and loss-making airports will disincentivize bidders.
• Channelize funds from profitable airports to develop small and new airports;
• Creation of value by resolving issues such as land availability issues faced by greenfield projects in Pune, Chennai and Ludhiana.
• Have Pre-Determined Charges be inked in the concessional agreements as done under the amendment in AERA act 2019, in line with best international airport privatization practice.
• This will avoid the current practice of fixing of aeronautical charges by AERA, which is prone to gaming and gold-plating.