Delay good for take-off

The delay in shortlisting successful bidders for the modernisation of six airports, including the one in Chennai, is probably a blessing in disguise for the government. It should now give the Ministry of Civil Aviation enough time to finalise a document that will be acceptable to all parties, and not lead to litigation at a later stage, as was the case during the modernisation of Delhi airport.

The Ministry’s deadline of January 7 to finalise the list of bidders for Chennai was not met. Given that it takes about three months from the time a successful bidder is chosen to handing over the airport for modernisation, it is highly unlikely that the process will be completed under UPA-II.

The delay has been caused by differences between the Civil Aviation Ministry and the Planning Commission. The latter wanted any increase in airport landing and parking charges to be linked to inflation. However, the Ministry felt the Airports Economic Regulatory Authority (AERA) should decide on the rates based on the Internal Rate of Return (IRR).

Now the government will be well advised to come up with a structured format for deciding on how these and other airports should be given out to private parties so that the interests of passengers as well as the private sector and the Airports Authority of India (AAI) are taken care of.

For this, the government should learn from private sector’s involvement in airports. Under the Vajpayee-led NDA government, Bangalore and Hyderabad airports were given to private players. These are two airports from which the AAI, which owns and manages a majority of airports across the country, does not get any revenue share. Being a 13 per cent stakeholder in these two airports the AAI gets a share of profits.  These airports replaced the older ones in the middle of the two cities.

At the other extreme are Delhi and Mumbai airports which were given to private players for modernisation by the UPA government. The process followed was revenue share between the private players and the AAI. The bidding was extremely aggressive and saw the private parties which modernised these airports pass on an increase in costs to passengers to make them financially viable.

Delhi airport has also been caught in a chain of controversies, with the CAG saying that the Civil Aviation Ministry violated the bid conditions for the benefit of GMR-led DIAL to the tune of over Rs 3,415 crore. The AAI gets a 46 per cent share of the topline for Delhi airport and a 38.7 per cent share for Mumbai, and passengers pay more to fly out from there.

Now, since the process for privatising Lucknow, Guwahati, Kolkata, Ahmedabad, Chennai and Jaipur has already run into its first roadblock, it is time for the government to take a step back and find the best possible model for modernising these airports. This is also essential because in the pipeline is the modernisation of over 30 non-metro airports across the country in the near future.

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