India to Privatize Six Major Airports

October 22, 2013 Posted by India Briefing Reading Time: 2 minutes

Oct. 22 – India’s Civil Aviation Ministry is hopeful that it will be able to privatize major airports in Chennai, Kolkata, Ahmedabad, Jaipur, Lucknow and Guwahati within a tight timeframe before the 2014 general elections. Originally developed by the Airports Authority of India (AAI), the Ministry will be handing over the airports in the next 2-3 months through public-private partnerships (PPPs). Already the ministry has begun to consult with prospective investors.

“We are quite optimistic about doing it within the time- frame. There is some cushion period available which we are using now,” said Civil Aviation Secretary K N Shrivastava. “We are going through the process of consulting all stakeholders, including [the] Planning Commission. We have held pre-bid consultations with prospective bidders. Our effort is to see that Request for Proposal (RFP), Requests for Qualification (RFQ), the concession agreement and other documents are properly drafted so that no issues are raised later.”

There have been several private firms who have expressed their interest for the airport project in Chennai, including IL&FS Transportation Networks Ltd., Essar Projects India, Cochin International Ltd., Essel Infraprojects Ltd., Fraport, GMR Airports Ltd. and the Sahara Group. Successful bidders to such airport projects will be partnered with the AAI for 30-years to operate and manage the facilities.

Some private parties, however, have raised a few concerns relating to the returns that are to be given to the AAI. There have been further delays in the PPPs caused by the finalization of concession agreements between the AAI and the interested private parties.

Furthermore, the International Air Transport Association has heavily criticized the privatization of these airports on the grounds that it will lead to significant increases in airport costs and charges. According to the Ministry, however, a tariff structure will be in place for the entire 30-year period with included clauses for escalation when costs are increased. This is to ensure that the private parties are fully aware of the potential revenue generation.

“We do not want costs – and consequentially charges levied on passengers and airlines – to go haywire,” said a Ministry source.

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