BUDGET WISHLIST: Aviation players' clamour for infra status continues

In the run-up to Union Budget for 2015-16, Business Standard looks at major developments and industry expectations in key sectors of the economy

BUDGET 2015-16 WISHLIST: AVIATION SECTOR

Key developments this year

• Traffic: The sector had a mixed year in 2014, with some airlines struggling financially but the overall passenger traffic increasing steadily across existing private airports, at seven to 10 per cent
• Investment: Private airports have seen an investment of close to Rs 29,000 crore, while those developed by the Airports Authority of India (AAI) have received close to Rs 5,000 crore
• Planned airports: A number of new airports are being planned at Navi Mumbai, Goa, Dholera, Pune and Greater Noida, and existing airports are being augmented

KEY ISSUES

•  Limited reach: Air travel in India continues to be restricted to metro cities, with minimal connectivity to Tier-II and -III towns
•  Tapping the demand: There is a need to integrate existing airports with larger catchment areas with high-speed multi-modal connectivity to tap latent demand
•  Non-aero revenue: Airports need to be allowed to increase their non-aero revenues, in line with global standards, to make running smaller airports attractive

CEO BYTE

“We are hoping for some relief on structural and tax issues. Our top expectations are an infrastructure industry status for aviation, reduction in service tax, classification of aviation turbine fuel among declared goods and investment in improving basic infra (runways, etc) at non-metro airports”

Sanjiv Kapoor, COO, SpiceJet

Passenger traffic at airports in FY14 | Create infographics

EXPERT VIEW
 

Business Standard had invited readers’ queries on the Budget for 2015-16. A PwC India expert answers a few key questions

 

Manish Agarwal, Partner & leader (capital projects & infra), PwC India

Is privatisation of airports like Jaipur beneficial? How could the PPP model be launched for airports? In the present scenario, what are the structural policy changes required for it? — Alok Dharpure

Privatisation of airports like Jaipur will bring in contractually committed level of efficiency in operations and planning. It will also add another stakeholder in attracting tourists to the cities concerned. However, good airport operators will be interested only if the private-public partnership (PPP) model provides predictability and certainty. The revenue share model (between an airport and the Airports Authority of India) and the regulatory framework (between an airport and the Airports Economic Regulatory Authority) are not sufficiently aligned, leaving airport operators with financial uncertainties. A pre-determined revenue cap framework (for regulation) and a capped revenue share (with AAI), even if limited to the first 10 years, could provide a structure compatible with the risk appetite of infrastructure investors; that is, low risk and steady returns.