Is Privatisation of Airports a Good Move?

Airport privatisation

Airport privatisationPrivatisation of Airports

According to data from the Airports Authority of India, between January and December 2014, the Indira Gandhi International Airport of New Delhi handled 39,752,819 passengers and the Chhatrapati Shivaji International Airport of Mumbai handled 34,993,738 passengers. These are the two biggest and best connected airports in the country. The modernisation programme of these airports was considered between 1996 and 2003 and was approved by an Airports Authority of India (AAI) board. The bidding process lasted between 2004 and 2005. In 2006, the two airports were handed to the GMR Group and GVK group respectively for modernisation with a revenue sharing agreement. Over the past decade, the Ministry of Civil Aviation and the governments at the centre have invited much criticism for the delays, loss of revenue, and allied reasons. The current NDA government seems to have rekindled the debate.

More Privatisation Plans

Under the administration of the UPA government, bids were invited for the privatisation of the airports at Chennai, Kolkata, Ahmedabad, Guwahati, Jaipur, and Lucknow. While about 11 private firms had tendered their applications for the bid, the privatisation process itself had to be deferred due to a standoff between the Ministry of Civil Aviation and the Planning Commission over the terms and conditions of awarding the project.

By the end of January 2015, the Civil Aviation Minister of India, Ashok Gajapathi Raju, announced that four other airports in the country were under consideration for privatisation. It is believed that the four airports under deliberation are Chennai, Kolkata, Ahmedabad, and Jaipur. The government went ahead to invite bids from domestic and international firms to manage the operations and development of these airports through PPP (public-private partnership). The decision came as a complete surprise for it had been only a couple of months since the government had decided against privatising Chennai and Kolkata airports. As late as November 2014, these two airports were being considered for management contracts and were to be dropped from the PPP roadmap.

Major Players in the Fray

About eight different companies have shown interest in bidding for the privatisation of Chennai, Kolkata, Ahmedabad, and Jaipur airports. These are – Adani Ports and Special Economic Zone Limited, Bhadra International (India) Pvt Ltd, Egis India Consulting Engineers Pvt Ltd, Flemingo Duty Free Shop Pvt Ltd, GMR Airports, GVK Group, International Business Development Flughafen Zurich AG Postfrach, and Siemens Postal Parcel & Airport Logistics Pvt Ltd. The representatives of these companies met with officials from the Ministry of Civil Aviation in a conference prior to invitation of tenders.

A number of other companies that had shown interest in participating in the airport privatization process of 2013 such as Celebi Habacilik Holding AS (Turkish firm), Cochin International, Essar Projects India, Essel Infraprojects, Fraport, IL&FS Transportation Networks, Reliance, Sahara Group, Tata Projects, and Tata Realty and Infrastructure seem to be reticent to bid this time over.

Of Unions and Protests

The government’s privatisation plans, though gladdening to some frequent fliers, have ruffled the feathers of the employee unions of these state-run airports. Members of the Airports Authority Employees Union (AAEU) have decided to stage an agitation starting 24 February 2015. The union has also called for an all-India strike on 11 March. The AAEU contends that the privatization of four more airports is in violation of the Tripartite Committee recommendations which were earlier agreed to by the government. The government of India has already spent a whooping INR 5,000 crore of public funds on modernising and upgrading these airports. Handing them over to private enterprises is not the way ahead, says the union. The Centre of Indian Trade Unions (CITU) has also been vocal in its opposition of the government’s decision to privatize the airports. It is likely that in days to come we may find many of our airport services paralyzed if this standoff is not resolved soon.

What Airlines Fear…

Most airlines fear that the privatization of Indian airports is only going to add to their financial woes with operational costs shooting up. Airlines point out that over the past three years, the airport charges borne by them have already increased by 346 percent in case of Delhi airport and 164 percent in case of Mumbai airport. In the case of Chennai and Kolkata where the government has spent about INR 2,400 crore each in development and modernisation, the charges have gone up by 269 percent and 385 percent respectively. Air India, for example is required to pay 87 percent more airport charges in Delhi to land a Boeing B787 Dreamliner than paid at the Singapore airport. Landing a Boeing B777ER in Delhi costs the airline 230 percent of the costs in Dubai. The International Air Transport Association (IATA), which represents over 250 airline operators across the world, went on to endorse the view that the government stop looking at privatisation as a “panacea” or cure to all the problems ailing Indian airports. While a ‘commercial flavour’ may be introduced by privatising them, the country or the government can hardly expect to make more money, said the IATA.