Grounded airports

Govt plan for privatisation has flaws

The government is proceeding with its plan to expand the footprint of private airports across the country. This is good news, in spite of the fact that the pandemic has cut a swathe through profitability and sustainability in the aviation and tourism sectors. It has been reported, however, that some changes will be brought into the privatisation policy after the outcome of previous rounds was subject to considerable criticism, including by employees of the Airports Authority of India — the state-run enterprise with responsibility for airports. This criticism revolved around two poles. First, there was concern that the six airports bid out in the last year — those attached to the cities of Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati — all went to the same bidder, Adani Enterprises. The Adani group is politically exposed, and has a high debt burden and no experience of running airports. There could, nevertheless, be no reason to exclude the group from bidding. But the build-up of an incipient monopoly is also something to be worried about. This criticism was thus justified.

The other concern is one that is regularly brought up around the question of privatisation, particularly when it involves the sale or lease of a set of assets and enterprises of a larger state-controlled concern. The worry was that the private sector would bid and take over only those airports with clear profitability, leaving the ones with unclear potential and possible unviability on the bench. As a consequence, over time, this strategy of privatisation would leave the Airports Authority of India with only the unviable airports, while the private sector developed and made profits off all the viable ones.

The government has reportedly taken both these criticisms on board. In response to the concern about an incipient monopoly, the next six airports will not be auctioned all together, as happened in the previous round. Instead, two airports at a time will be bid out, and the winner in each bid will be restricted from the next round. The government’s willingness to listen to criticism is welcome. However, it should look again at the process giving the original six airports to a single bidder as well, and see if there are ways in which the problematic monopoly aspect of the result can be mitigated.

The problem is that the second criticism has also been answered, reportedly by a decision to club one non-viable airport — such as Kushinagar near Ayodhya — with a viable airport — such as Lucknow and bid out the bundle. This may seem to the government like a convenient and easy way to get some non-viable airports off its hands. But it is short-sighted. One of the elementary rules of public finance is that subsidies should be as transparent as possible so they can be properly evaluated by auditors, legislators, and voters. In this case, the subsidy to the non-viable airports will be hidden in the higher costs paid by travellers at the viable airports. This is fundamentally unfair, reminiscent of the policy of lumping north-eastern air routes with the trunk routes. The responsibility for making an airport viable, or for subsidising an unviable one if it is considered vital in the public interest, belongs to the government alone. It requires a comprehensive regional growth plan, not shifting the burden on to the private sector. This aspect of the privatisation policy must also be rethought.