Draft civil aviation policy: AAI may claim 49% stake in second airports

At present, no greenfield airport is allowed to be constructed within 150-km radius of an existing one

The Airports Authority of India (AAI) can claim up to 49 per cent stake in case a second greenfield airport is constructed within 150-km radius of an existing AAI-run airport. In the draft civil aviation policy, released on Friday, the Centre had eased norms with respect to setting up of a second airport in the same city.

“AAI may be suitably compensated by the government of India and/or relevant state government in case a new greenfield airport is approved in future within a 150-km radius of an existing operational AAI airport. Alternatively, AAI may be given the option to have the right of first refusal or equity participation up to 49 per cent in the new airport at its discretion,” said the draft civil aviation policy.

At present, no greenfield airport is allowed to be constructed within a 150-km radius of an existing one. A second airport can be built only with Union Cabinet’s approval and after the parameters for distribution of traffic between the two airports are clearly spelt out.

Although AAI has no plans to build a second airport near any of its airports at present, Centre for Asia Pacific Aviation (CAPA) Chief Executive Officer Kapil Kaul said 40 AAI airports are approaching saturation in handling passenger capacity in the next five years.

“I don’t see this as feasible. AAI’s role has to be recast, as they have delivery challenges and we are expecting too much out of AAI which is not practical…We need larger private sector participation with learning and experiences of previous PPP projects factored in the policy formation but not handover (of) airport development to AAI,” Kaul said.

The draft civil aviation policy has spelt out a detailed role for AAI in developing future airports. It stated around 400 under-served or un-served airstrips will be revived by developing low-cost airports “mostly through AAI”. The regional connectivity fund (RCF), which will be collected by levying two per cent cess on domestic and international air tickets for viability gap funding of regional routes, will be collected and monitored by AAI.

Also, AAI will monitor the capital expenditure of all the future airports built through the public-private partnership (PPP) model.

The draft policy states AAI will take up new greenfield or brownfield airports only if the projects are viable, state or central government provide viability gap fund in case of unviable projects and land is provided free of cost by state government without claiming any equity.

However, experts have criticised the dependence on AAI for development of airport infrastructure and called for more private sector participation. “We need to develop an alternative model and reduce dependence on AAI over a period of time and we expected this draft policy to clearly address this. The draft policy itself sets a target of 300 million domestic passengers in the next seven years for which the airport capacity simply does not exist,” Kaul said.

At present, AAI runs a total of 125 airports, out of which 95 are operational and 71 have scheduled operations as of July this year. Out of these, only eight airports are profitable.

The draft policy states the Union government will continue to support development of airports by private sectors or in PPP mode. However, Civil Aviation Secretary RN Choubey clarified, in an interview last week, it has no plans to develop airports through the PPP model at present.