Govt scraps plan to corporatise AAI

Air Navigation Services will continue to be a part of AAI

The Centre has scrapped the plan to corporatise the Airports Authority of India (AAI), which would have allowed it to raise funds from the market to modernise airports. According to sources, the long-pending plan to hive off Air Navigation Services (ANS), which handles air traffic control operations, from AAI has been put in the cold storage. This means the government's plan to list AAI on the stock exchanges will not take off.

Earlier, the government had halted the process of privatisation of airports at Kolkata, Chennai, Jaipur and Ahmedabad. Listing of the AAI on stock exchanges along with the development of the four airports under a public-private partnership model were part of the National Democratic Alliance (NDA)'s draft civil aviation policy.

"If you create a separate entity, a huge bureaucratic setup will have to be created and the air traffic controllers will have to be licensed. In the current setup, if all the conditions of International Civil Aviation Organization are met, no such requirement is there. Further, Indian ANS is rated to be quite high on global standards," said a senior civil aviation ministry official.

According to the plan, a new government-owned ANS Corporation was to be formed, which would be responsible for navigation, surveillance and air traffic management. At present, the AAI is responsible for airport operations and navigation. After hiving off, the AAI would have been listed on the stock exchanges, helping it raise money for modernisation of airports and focus only on managing airports.

Civil Aviation Minister Ashok Gajapathi Raju had said in November last year that this move would increase transparency and efficiency of the AAI. The move had witnessed protests from a section of the 5,000-odd employees of ANS, who feared such a move might lead to considerable dip in the AAI's revenues impacting them in the longer run.

ANS constitutes roughly 30 per cent of the total revenue received by the AAI. According to the provisional estimates, the AAI's revenue stood at Rs 8,743 crore in 2014-15 and ANS' revenue was Rs 2,430 crore. In 2012-13, the second-largest contribution that year came from route navigation charges of Rs 1,796 crore.

Experts termed the decision 'unfortunate' and said hiving off ANS was the need of the hour given the growth rate of the aviation space.

"The decision to not hive off ANS was on expected lines and not surprising. This decision is unfortunate as hiving off ANS was a critical reform and necessary for creating capacities required to meet growth and safety challenges. Indian ANS needs to move towards delivering demand-driven network with a strong service culture but continuing with status-quo means no appetite for structural changes at present," said Kapil Kaul, CEO (South Asia) at Centre for Asia Pacific Aviation (CAPA).

In a report titled 'Corporatisation of Air Navigation Services in India: A Governance Model for Future Growth?', CAPA said ANS corporation would have led to the body generating its own revenue through air navigation charges in return for aeronautical services that satisfy both airlines and regulators' need. It added this would diminish and "ultimately remove" the need for government funding.

Many government panels in the past such as the Tata Committee, Justice Lahoti Committee, Julka Committee, Naresh Chandra Committee, Roy Paul Committee, and Ajay Prasad Committee have recommended that ANS functions be segregated from AAI. In 2007, the civil aviation ministry had asked consulting firm KPMG to conduct a study in this regard, which too, recommended hiving off the ANS.

The plan to list AAI was announced in 2009 by the United Progressive Alliance government.

At present, the AAI manages 125 airports in the country, which includes 11 international airports.