A Planning Commission task force has urged complete privatisation of the operations and maintenance of the Chennai and Kolkata airports. This includes both air and city-side facilities.

The development of these airports, it recommended, should be through a private-public-partnership (PPP) concession. While structuring this arrangement, it should be ensured that the interests of the Airports Authority of India (AAI) employees are fully protected, the task force noted. To start with, bids for the Chennai airport could be awarded within the next four months, followed by the Kolkata airport, it has said.

The task force, under the chairmanship of B.K. Chaturvedi, Member, Planning Commission, went into the financing plan for airports during the Twelfth Five Year Plan.

The AAI has undertaken redevelopment and expansion of the Kolkata and Chennai airports at a cost of Rs 2,325 crore and Rs 2,015 crore, respectively. The work at Chennai has already been completed, and it will be over in Kolkata soon.

Lower user charges

The anticipated shortfall in non-aeronautical revenues is bound to lead to higher passenger and aeronautical charges related to monitoring and supervision of large number of sub-optimal service contracts being awarded by AAI. This could be eliminated if a single PPP concession for operation and maintenance of the entire airport is granted to an experienced and competent entity.

AAI needs to generate significant revenues from airports such as Chennai and Kolkota to invest in development of new airports. As an example, the Task Force examined the tariff filings of AAI before the airport regulator. . It was noticed that AAI proposes to increase its present passenger fees at Chennai airport from Rs 77 to Rs 237 (over three-fold increase) in the case of domestic passengers and from Rs 77 to Rs 577 (over seven-fold increase) in the case of international passengers.

The increase will be burdensome for the passengers and may affect traffic growth. If the increase is not allowed, AAI is likely to make losses, which will affect its operations elsewhere. It was felt that if a PPP concessionaire was engaged, it could raise significant non-aeronautical revenues. This will reduce the passenger fees and also achieve the primary purpose of setting up the AAI to provide better passenger services at affordable fees.

These limitations are best addressed through a PPP where the user charges could be fixed upfront at a reasonable level and then the bidders may be asked to offer a revenue share, the task force said. Airlines will welcome such an arrangement and passengers may benefit by way of lower user charges and efficient airport services, according to the recommendation.


(This article was published on August 9, 2012)
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