A smooth take off for airport disinvestment?

AK Sachdev | Updated on April 18, 2021

Airports Privatisation push   -  THE HINDU

By amending the AERA Act, the Centre is trying to attract investors to Tier-2, Tier-3 airports

Privatisation has been a part of Modi government’s agenda.

Possibly the financial stress caused by Covid-19 made the government move in this direction. The Finance Minister emphasised during her Budget speech that monetising public infrastructure assets was critical to financing new infrastructure construction.

She did not pronounce a target, but the Prime Minster mentioned a few days later that the plan was to monetise a hundred government owned assets and PSUs to the tune of ₹2.5 lakh crore; reportedly, ₹20,000 crore is to be realised from residual government stake in major airports and monetisation of Tier-2 and Tier-3 airports.

While the past position of the government had been that big airports were being privatised so that cash could be generated to invest in smaller airports, this Budget subtly swung the focus to include monetisation of Airports Authority of India (AAI) airports in Tier-2 and Tier-3 cities to raise money for building new infrastructure. The problem is that most of these airports do not hold much allure for prospective investors.

AERA Amendment Bill

A significant step to expedite this process is the Airports Economic Regulatory Authority (AERA) of India (Amendment Bill, 2021) introduced in the Lok Sabha last month. The original AERA Act, 2008 (which bestows upon AERA the power to regulate tariff and other aeronautical charges at major airports) defines a major airport as one which has, or is designated to have, annual passenger throughput in excess of three-and-a-half million or any other airport as the Central government may, by notification, specify as such.

The 2021 proposed amendment seeks to extend the scope of the term major airport by adding after “or any other airport” the words “or a group of airports”. The implication is that AERA can now determine tariff and other charges for aeronautical services levied at small airports by grouping them together into one entity for the purpose of aeronautical charges. The underlying rationale is that the development of smaller airports where there is low traffic will be promoted through their being clubbed with the profitable ones.

The plan to make Tier-2/Tier-3 airports more attractive to private investors will solve two problems that aviation is facing.

Firstly, it will help the government’s overall monetisation plan by including loss making small airports into the privatisation ambit; and, secondly, it will promote lethargic regional flying by spurring air traffic to remote and under-served airports.

The government is looking to privatise the airports at Amritsar, Bhubaneshwar, Indore, Raipur, Tiruchi and Varanasi; the amended AERA Act will pave the way for clubbing some loss-making airports with these six.

The success of this move remains to be seen as past incentives to make Tier-2/Tier-3 airports more attractive through the Regional Connectivity Scheme (RCS) were not encouraging.

Undoubtedly, airports are a significant ingredient of infrastructure, but the fact that civil aviation is still associated in the establishment psyche with luxury and extravagance is evident from the fact that a long-standing demand of the aviation industry to be accorded infrastructure status, remained unaddressed by this Budget too.

The writer is a former COO of a commercial airline.

Published on April 18, 2021

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