Tamil Nadu govt wants equity in privatised airports in return for land

State makes revenue sharing a must; move comes amid Centre's shortlisting of four key airports in TN for privatisation between 2022 and 2025

The Tamil Nadu government has made it mandatory to proportionately share revenue with the state, in case the Centre decides to go for privatisation of airports. This comes at a time when the Central government has shortlisted Chennai, Trichy, Coimbatore and Madurai in the list of 25 airports to be privatised between 2022 to 2025.

This decision was made looking into the factor that the state has invested heavily on the asset, including the land parcel acquisition, the state said in a policy note on Wednesday. This comes into picture if the state government acquires and transfers the lands to the Airports Authority of India free of cost and the Airports Authority of India or Government of India transfers the assets to a third party.

“The value realized or revenue accrued thereby, must be proportionately shared with the State Government reflecting the huge investment in land being made by the State Government,” the policy note said. The airports were selected looking into the traffic data and those having an annual traffic of more than 0.4 million passengers. During the last financial year, the Centre government had indicated that it is planning to raise around Rs 20,782 crore by 2025 through monetising 25 airports across the country.

The state government has also decided that at an appropriate stage, it has to be ensured that the value of the lands should be converted as equity of the State Government in the Airport Project Special Purpose Vehicle or an appropriate revenue sharing arrangement proportionate to investment, before  any asset transfer takes place to a private party.

As per the policy decision taken during the year 2007, to construct new airports or for expansion of airports, Government of Tamil Nadu is acquiring lands and handing over the same free of cost.

A senior central government official said that it will be the central government’s decision to accept this demand of the state government pointing out that this is not the first time state government are demanding equity in return of land. In case of Chandigarh Airport, Punjab and Haryana had provided the land for the development of the airport and treated the cost of land as a part of their equity in the company which was formed for the development and operation of the airport.

“In the past, the state governments required to provide the land free of cost to AAI for construction of airports. But with the privatization of airports, the state governments are reluctant to provide valuable lands free of cost for airport development. In some cases, land has been provided on lease basis. And some of the state Governments want the land cost incurred by them to be part of the equity of the airport operator for strategic reasons or to get higher returns in the form of dividends or appreciation in the value of shares,” the official said.

New airport in Chennai

The State Government has proposed to set up a Greenfield International Airport near Chennai to keep pace with the level of projected air traffic growth and to meet the global demand for air transport services in the long term.

The government had entrusted Tamil Nadu Industrial Development Corporation (Tidco) with the work of identifying potential sites for development of new Greenfield Airport. Tidco has already identified four potential sites and has requested the Airport Authority of India to study the feasibility of sites for setting up a Greenfield Airport. A team of AAI officials also visited the four sites and have submitted their feasibility report, the policy note added.

Regarding the expansion of Chennai airport, the policy note said that the state government will be handing over around 30.57 acre patta land to the Chennai airport by the end of April. The AAI had asked the state government to provide around 64.57 acres of patta land.