Comprehensive Airport Policy Being Finalised

A comprehensive airport policy is being finalised by the civil aviation ministry to lay down guidelines for all future private sector investments in airport projects and the maximum foreign equity permissible to develop the crucial infrastructure.

According to official sources here, the issue of whether or not foreign companies can hold majority equity stake in airport projects is under detailed discussion among the various departments concerned.

However, it has already been made clear that there is no proposal to grant permission to bring 100 per cent foreign equity for airport development.

The airport development policy will also include a framework for related projects such as multi-storeyed parking lots, hotels and other airport infrastructure facilities.

 

The policy was, in fact, due to be announced in the budget session of Parliament close on the heels of the domestic aviation policy which kept out foreign airlines from operating domestic air transport services. Foreign equity up to 40 per cent and non-resident Indian (NRI) investment up to 100 per cent has been permitted for operating domestic airlines.

Official sources said the quantum of foreign equity for airport development was likely to be more than the 40 per cent ceiling stipulated for domestic air operations since government was in favour of permitting foreign companies to invest majority funds in capital intensive infrastructure projects.

A sense of urgency is also being imparted in finalisation of an airport policy to attract badly-needed funds in the wake of the outburst by Prime Minister I K Gujral during his recent visit to Nepal against the existing policy regarding civil aviation-related activities.

The Centre has, at present, permitted foreign companies to form joint ventures with Indian firms and foreign equity participation is permitted up to 40 per cent only. Airports where private sector participation has been envisaged during the next five years are Delhi (new domestic terminal of international standard and second runway), Hassan (Karnataka), Devanahalli (Bangalore), Mumbai (new international airport as an alternative to Ssahar), Goa, Ahmedabad (international terminal) and Aurangabad.

Private sector participation has also been proposed for developing Amritsar to international standards, Guwahati, Jaipur (runway extension and international block), Varanasi, Mangalore and Cannanore airport from greenfield stage, new terminal building at Trivandrum and cargo complex at Chennai.

Official sources said a uniform airport policy was found imperative since till now the civil aviation ministry had reached a consensus only on the model that an airport project should follow.

Though the civil aviation ministry under the stewardship of C M Ibrahim has been sticking to the stand that private sector must follow the build-operate-transfer (BOT) model, the new policy is likely to allow the private parties concerned to run an airport during the gestation period.

This time period will be worked out by the parties in coordination with the government.

The proposed airport development policy will also have a bearing on the controversial Bangalore international airport project floated by the Tata-Raytheon-Singapore Airport Authority.

The Centre had withheld clearance for the Rs 1,500-crore project following a deadlock between the civil aviation ministry and the Tata-led consortium on the ownership criteria. The consortium has proposed building the project on build-operate-own (BOO) format.

The proposed Tata-SIA joint venture domestic airline also has to wait for the announcement of the new civil aviation policy to know its fate. The proposal was rejected with government disallowing any equity participation by foreign airlines in the domestic sector.

An approach paper prepared by the civil aviation ministry on airport-related activities is also expected to be the part of the new airport policy. The paper has worked out a legal

framework for private investment and also outlined incentives to accelerate this exercise.

Besides outlining the need for private investment to develop the airport infrastructure area, the approach paper focuses on ownership patterns, ranging from a joint venture between the Airport Authority of India (AAI) and/or the state government and the private party to greenfield projects (new airports) to be developed totally by the private sector.

The paper outrightly ruled out development of an airport by the private sector on a BOO basis and firmly supported projects on a build-own-operate-transfer (BOOT) principle.

The paper makes it categorically clear that air traffic control will remain completely under the authority of AAI, given its security implications.

It says the government will identify existing airports and greenfield project cities where potential for private sector participation exists. There are several airports in the country which are badly in the need of modernisation, but upgradation progammes has not been undertaken due to paucity of resources.