Govt open to full private ownership in 8 planned airports

Also ready to give 100% equity to private players for operations and maintenance of six brownfield airports

The ministry of civil aviation is open to giving 100 per cent equity to a private concessionaire in the development of new airports.

A senior official at the ministry said: “We are open to 100 per cent equity participation from private players in the development of greenfield (new) airports. But in instances such as the one in Jamshedpur, where the Tata Group has specified that they want the Airports Authority of India (AAI) to be a partner in the development of a new airport, we will consider partnerships.”

The government had also said airports’ operations and maintenance through public-private partnership (PPP) contracts will be introduced in Chennai, Kolkata, Lucknow, Guwahati, Jaipur and Ahmedabad. These six airports were scheduled for privatisation this year.

The request for qualification (RFQs) for Chennai and Lucknow would be issued next week, it said. The one for Kolkata would follow later.

“In the case of brownfield (existing) airports, operations, maintenance and development agreement (OMDA) under the PPP model will be considered,” the ministry official said. “We are open to giving 100 per cent equity to the concessionaire. AAI, with 26 per cent equity, cannot have any say in the operations of a company, so they would only end up locking up resources. The option would be discussed at the RFP (request for proposal) stage.”

The private concessionaire would share revenues with the AAI. The revenue-share agreement would factor in development costs in case of airports that have already been modernised by the AAI. The concessionaire would be awarded the OMDA contract for 30 years.

In June, the Prime Minister’s Office had set as this financial year’s target awarding greenfield airports on a PPP in Navi Mumbai, Juhu, Rajguru Nagar (Maharashtra); Kannur (Kerala); Sriperumbudur (Tamil Nadu), Bellary (Karnataka); Raigarh (Chhattisgarh) and Goa.

To address concerns that privatisation of the six brownfield airports could result in higher charges for passengers, the tariff to be levied after privatisation would be determined prior to awarding the projects.

Another official said: “If you are going in for bidding, there has to be some certainty in tariff. The AERA (Airports Economic Regulatory Authority) will fix the tariff for five years, which will be reviewed thereafter, taking into account capital requirement for expansion works for the next five years. Any price increase can be linked to the wholesale price index so that there is certainty what the charges are going to be like once the private concessionaire takes over operations.”

Industry bodies have been opposing the privatisation of AAI airports,  saying it would push up costs. “The airlines and the International Air Transport Association are concerned that any unnecessary private shareholding might increase the focus on profit-maximisation and as a result, increase users’ costs. The privatisation of these six AAI airports would only serve to fuel a further round of increases in the airport cost environment, adding to costs for passenger and the airlines,” the International Air Transportation Association wrote in a letter to the aviation ministry.

In the past, too, the International Air Transport Association (Iata) and airlines have been opposing private developers GVK and GMR's proposals to hike aeronautical tariffs at Mumbai and Delhi airports, citing that increased costs would negatively impact the airlines.

In its Q1 FY14 investor presentation, Jet Airways said its result was impacted by $6 million (Rs 39 crore) due to an increase in landing and navigation charges at Mumbai, Delhi, Chennai and Kolkata airports.