Step backward on reform

Government junks plans to modernise airport sector

If the events of the last few days are any indication, the government seems to have pressed the pause button on airport reform. First, it dropped plans to privatise four airports: Chennai, Kolkata, Jaipur and Ahmedabad. And now, as reported in this newspaper, it has mothballed its plan to corporatise the Airports Authority of India, or AAI, and separate Air Navigation Services, which controls air traffic, from it. Earlier, it had put on hold the United Progressive Alliance's ambitious plan to develop low-cost airports in 50 non-metro cities. The decision to privatise airports and corporatise AAI was resisted by employees who feared there would be job losses. Whether or not their fears are misplaced, this can hardly be the reason to stop essential reform. It is also possible that the charge of running a suit-boot ki sarkar has rattled the National Democratic Alliance and it wants to do nothing that can lead to allegations of cronyism against it.

In the process, the industry and flyers will get the rough end of the stick. That the airport infrastructure in the country needs overhaul is no secret. Not all airports can be privatised, particularly those in remote areas - but they do need to be maintained. It is therefore best that busy airports be privatised, and the annuity this will fetch AAI can be used to upgrade the infrastructure at other airports. The privatisation of airports in Delhi and Mumbai in 2005 has made life easier for passengers; it has also filled AAI's coffers. The contribution of the two airports to AAI's revenue went up from 20.1 per cent in 2010-11 to 32.7 per cent in 2013-14. If their contribution is taken out, AAI would have reported a loss in each of the last four financial years. With its decision to scrap the privatisation of the Chennai, Kolkata, Jaipur and Ahmedabad airports, the government has deprived AAI of a sizeable and stable source of income.

Meanwhile, AAI's corporatisation was meant to help it list on the stock market and raise money, which could have been used to modernise airports. Now that source has also been cut off. No less worrisome is the decision to not hive off Air Navigation Services from AAI. The idea was that AAI should focus on airport upgrades, while Air Navigation Services would control air traffic. This was a critical reform, essential to build capabilities to meet the growth and safety challenges in aviation. Experts have for long felt that Air Navigation Services need to provide demand-driven facilities and develop a strong service culture. The latest decision is likely to halt this process, and freeze the status quo in place. Various committees in the past have stressed the need for Air Navigation Services be segregated from AAI so that it can stand on its feet. Both these decisions are a huge step backward in policy reform.