Grounded in Mumbai

Issues related to airport deal raise questions

There is no question that the disposal of India’s assets in civil aviation is proving to be controversial. The government’s recent actions in this sector may lead to the build-up of a monopolistic capture of the sector, almost certainly leading to major problems for travellers, airlines, and the government itself in coming years. As this newspaper has argued, the Thiruvananthapuram airport dispute shows all the signs of simmering for some time, and it will be difficult to get co-operation from the state government — or even the opposition. The issues involved with the Mumbai airports — current and proposed — are even more thorny. The existing Mumbai airport, run since the mid-2000s by Mumbai International Airport Ltd (MAIL), which is 26 per cent owned by the Airports Authority of India, is seriously stressed at the moment, thanks in part to the pandemic. According to CRISIL, MIAL will have to pay Rs 65 crore for servicing its debt just in September, and it has built up almost Rs 150 crore in accrued interest during the pandemic-linked moratorium on payments since March. This report has led lenders to MIAL to demand a repayment schedule from the company’s controlling interest, the GVK group.

The GVK group, meanwhile, which had long sought to prevent the Adani group from taking a stake in MIAL, is now reportedly in talks with the latter itself. GVK owns a majority of MIAL; the final 23.5 per cent shared between the Bidvest group and Airports Company of South Africa (ACSA). GVK itself had previously sought to fight off the Adani group’s attempts to get a foothold in that 23.5 per cent through attempting to raise Rs 7,600 crore from investors including subsidiaries of the Abu Dhabi Investment Authority, India’s National Investment & Infrastructure Fund, and the Canadian pension fund. Unsurprisingly, these groups strongly object to any attempt by the Adani group to directly buy out GVK’s control of MIAL. In turn, ACSA and Bidvest object to the GVK group selling part of GVK Airport holdings to the pension and sovereign funds.

Three issues here need broader attention. The first is that this dispute is delaying construction on the new Navi Mumbai airport, for which MIAL won a bid in February 2017. Greater capacity will be needed at all global airports as the world tries to rebuild air travel while maintaining the pandemic-related checking, which will last for some time even after a vaccine is discovered. Mumbai’s current airport is overloaded. The second problem is that both local and national monopolies should not be allowed in airports. Competition must be reintroduced to the sector. The Adani group has won the concessions to the six airports put on the market in recent years. Finally, questions can and must be asked about the timing of a case imposed by Union government agencies on GVK and associates with regard to the handling of the Mumbai airport. Without prejudice to what is finally uncovered, the pressing of a case at this crucial time in negotiations between GVK, lenders, investors, and the Adani group gives an unfortunate impression of crony capitalism. That should be avoided.