Aviation World Feature
Airport infrastructure is the essential skeletal framework of aviation but generally tends to be taken for granted, possibly because addition of new airports and transformation of old ones happen at a slow pace and away from public glare. Nonetheless, airports play a vital role in sustaining aviation, supporting the transport network, promoting trade and tourism, and contributing to economic development of the nation. Covid-19 has been exceptionally unkind to civil aviation with airports possibly being the worst affected sector.
By Gp.Capt. AK Sachdev (Retd.)In India, airports, being capital and real estate intensive, were in public sector domain during our initial years but that has changed in the last two decades with change of policies and the government’s fiscal compulsions to disinvest in them. There are close to 500 airports strewn over the extent of the country with 139 of them being under the public domain and owned by Airports Authority of India (AAI) according to AAI’s official site (https://www.aai.aero/en/business-opportunities/indian-airports accessed on 08 February 2021). According to AAI, the total number of functional airports in India is 153 of which 29 are international, 114 are domestic and 10 customs airports (at which unloading of imported goods and the loading of export goods is permitted). To put this figure into perspective, US, which has a billion less people than India, has over 5000 functional airports. This article critically appraises the push for privatising airport infrastructure.BUDGETARY IMPETUS
The central government budget presented in 2018 had introduced NextGen Airports for BHarat (NABH)Nirman initiative. It proposed to increase the existing capacity of airports by more than five times through construction of 100 new airports in the next 10 years. An impressive sounding figure for investment in that direction was also mentioned but the onslaught of Covid-19 rendered all that planning superfluous. Indeed, aviation went into survival mode globally and it is only now that optimism is beginning to manifest itself in actions and thoughts of aviation stake holders, including the government.

The budget presented last month reflected some of that buoyancy; the Finance Minister’s budget presentation speech mentioned the word ‘infrastructure’ more than 40 times and included a proposal to set up a Development Finance Institution (DFI) with a capital of Rs 20,000 crore and an ability to lend up to Rs 5 lakh crore. The issuance of Zero Coupon Bonds for infrastructure funding also has the possibility of providing an avenue for aviation financing.Disappointingly but unsurprisingly, the long standing demand of civil aviation to be given infrastructure status remained unaddressed. The total budgetary allocation for aviation was Rs 3,224 crores, a figure representing 22% reduction as compared to the ongoing fiscal year. Of this, airports have been allocated Rs 600 crores mainly for the revival of 50 airports that fall under the Regional Connectivity Scheme (RCS). Airports Economic Regulatory Authority of India(AERA) has been allocated Rs 10 crores. Besides, the Airports Authority of India (AAI) saw a provision of Rs 5,139 crores marked under Internal and Extra budgetary resources; the implication is that AAI will have to put up collateral to raise funds. The aviation portion of the budget has endeavoured to convey that the financial problems of airports are being addressed. However, the actual availability of funding is a bit nebulous, given the fiscal pressure this budget will be consummated under. There is thus a momentum building up for finding other means of funding airport infrastructure.

In December 2019, the National Infrastructure Pipeline (NIP) had been launched; it now has a pipeline of 7,400 projects, which require major funding expansion from both government and private sector. The government’s plan is to realise this goal through three concrete measures: creating the necessary institutional structure, monetising assets, and expanding capital investment through budgets. Monetising functioning public infrastructure is a way to generate more funds by drawing in private sector participation and that is the route airport infrastructure development is embarked upon.

PRIVATISATION
In her budget speech the Finance Minister said the government would be monetising assets of the AAI-operated airports in Tier-2 and Tier-3 cities to raise money for building new infrastructure; this is a significant departure from the past where the government has maintained that big airports were being privatised so that the cash thus generated could be invested in airports in smaller cities.

In a semantic quirk, the disinvestment in AAI’s airports has been always referred to, rather euphemistically, as privatisation — a term that encompasses the whole spectrum of private participation from a wholly private ownership to a Public Private Participation (PPP) model with multiple participants. As can be expected, each model has a unique texture withdiverse partners getting into bed but with disparate dreams. The result is that all the PPP ventures have not had the same degree of success. Perhaps the only thing common to airports moving away from the AAI fold has been the incremental addition to the air passengers’ burden.

The first Indian airport to be privatised in India was Cochin as far back as 1999, followed by Hyderabad in 2002 and Bengaluru in 2004; Delhi and Mumbai — the two largest airports in the country — were privatised in 2006. At that time there was no airport regulator (the Airport Economic Regulatory Authority (AERA) came up only in 2008 as a result of a Parliamentary act. It is not clear whether this fact contributed to the additional burden of privatisation on airlines (which in turn passed it on to the passengers). Privatisation was resisted stoutly by airlines but the government was unrelenting. Meanwhile, the project costs of airports overshot the original estimates (Delhi by 3.8 times and Mumbai by 1.7 times) with the incremental costs being passed on to the passengers through development fees to the tune of Rs 3400 crores. These figures are mentioned here to show the passenger pain related to airport privatisation.

After 2006, there was a lull in the interest from potential investors in airports until 2015 when disparate entities again started looking at airports as lucrative ventures. In a process that commenced in 2018, Ministry of Civil Aviation (MoCA) awarded the airports at Lucknow, Ahmedabad, Thiruvananthapuram, Guwahati, Jaipur and Mangalore to Adani Group.

In a third wave of airport privatisation, after the budget last month, Secretary MoCA announced after the budget thatit plans to invite bids to privatise six to 10 state-run airports in the first quarter of FY 2021-22, with plans for a “package” offer that clubs profitable and non-profitable airports to realise optimum value. He added that the airports would be given to private sector for 50 years and that the bidding terms for the operation of the airports, their management as well as the development of infrastructure will be structured to encourage long-term leases of the facilities.Reportedly, the six airports identified for privatisation in the third round are Varanasi, Bhubaneswar, Raipur, Indore, Amritsar and Trichy. Once these airports are also privatised, the PPP proportion of airport capacity will be around two thirds of the entire country’s.

DUAL AIRPORT OPTIONS
Privatisation of airports is all set to spread its paws over airports that, despite increase of their capacities with addition of runways/ terminal building, are still falling behind the growth of passenger demand due to the distension of the cities they serve. Although the private operators have differing of contracts with AAI, all have clauses that effectively shut down or ban use of the older airports in their cities. The same state is likely to accrue in Goa when the proposed airport at Mopa comes up.However, as the passenger was the loser in such arrangements (and the airport operator the gainer), gradually that monopolistic situation is being mended and second airports are coming up at Jewar and Navi Mumbai to complement the ones at Delhi and Mumbai. However, whether the ugly head of monopolism is eradicated is yet to be seen as a share agreement has been approved transferring 74% stake in Mumbai airport to Adani Group which also has 50.5% share in the Navi Mumbai airport under development.

REGIONAL AIRPORTS
Despite a lot of hype about UdeDesh ka AamNagrik (UDAN) and a Regional Connectivity Scheme (RCS) launched in April 2017, regional airports have not come up as envisaged under the scheme, the single major reason being their low profitability. Even before the RCS came about, MoCA had proposed (in 2015) in to build up to 100 no-frills airports. However, not a single airport got built as there was a mandated requirement for them to earn a Return On Investments (ROI) of 12 percent. In the aftermath of the Budget 2021, the Aviation Minister, reportedly declared that, under the RCS, MoCA has set a target of operationalizing as many as 100 unserved and underserved airports and starting at least 1,000 air routes. Significantly, he averred that it was not the government’s specialization to run airports and that privatization was required in civil aviation. Clearly, the government is banking on privatisation of existing airports as well as private participation in green field airport projects. In the long run, this initiative will enhance connectivity to existing as also to remote and regional Tier 2/Tier 3 towns and cities but at a cost to the passenger.

CONCLUSION
One way to provide succour to the passenger is to keep monopolistic dispensations out of airport infrastructure but, at the moment, that does not appear to be a priority for the government which is looking at the laudable target of increasing the number of operational airports and ignoring the ugly implications of monopolies. All the six airports allotted under the second round have been bagged by Adani as also both the airports serving Mumbai. In any case the total number of players in India that have shown interest is only about a dozen while foreign players have not exactly had delightful experiences in airport ventures they partnered in and have largely exited (albeit after having garnered impressive returns on their investment). While the government cannot be faulted for having the ‘ends’ of more operational airports in mind whatever be the ‘means’ that get employed, introducing policies that inject competition into the airport market may reduce the cost to the passenger who, all said and done, must remain the ultimate intended beneficiary of airport proliferation.

(The author has more than four decades of aviation experience in the IAF and in civil aviation and was Chief Operations Officer of an airline.)
Published in Aviation World March-April 21 edition