Airports may be privatised on basis of tariff to safeguard passengers against high user charges

Tariff bids likely; move to safeguard airlines, passengers from high user charges

The aviation ministry is considering privatising airports through tariff bids as protection against high user charges for airlines and passengers.

An airport identified for privatisation could be awarded to the private operator quoting the least tariff. Airports Authority of India (AAI) will lease out the airport for 30 years for a fixed fee or rent to ensure user charges stay low.

“Our experience with privatisation has shown tariffs in cost-plus projects are based on investments made by the operator. User charges consequently shoot up. We are now looking at a model where airports can be privatised on the basis of tariffs,” a government official said. “The turnaround cost for a jet is around $6,000 at an Indian private airport and $2,300 at Changi airport (Singapore).”

Tariff bids also address the Comptroller and Auditor General’s observations on the privatisation of the Delhi and Mumbai airports. “Once there is certainty about the tariff structure, there will be little room for private operators to gold-plate airport upgradation projects,” another official said.

The government had earlier this year considered privatising airports by setting landing and parking charges before the award and subsequent increases would be indexed to inflation.  This suggestion by the Planning Commission was shelved because of the upward bias in charges even after an operator had recovered its investment. The aviation ministry also felt it would restrict the role of the Airports Economic Regulatory Authority.

Privatisation of the six airports at Chennai, Kolkata, Lucknow, Guwahati, Jaipur and Ahmedabad, initiated last year by the United Progressive Alliance government, was put on ice over differences between the aviation ministry, then headed by Ajit Singh, and the Planning Commission over terms of the award.

The National Democratic Alliance government will privatise only the Ahmedabad and Jaipur airports instead of the six originally planned. A draft aviation policy announced on Monday says management contracts will be issued for the Kolkata and Chennai airports and the privatisation of Guwahati and Lucknow airports has been put on hold.