The Centre is preparing to privatise 11 airports by combining them into five groups, with the proposed model designed to use revenues from larger airports to support smaller ones and improve their long-term viability.
The Public Private Partnership Appraisal Committee (PPPAC) has given an in-principle approval to the civil aviation ministry's proposal. The plan is to award each group to a single private concessionaire under the public-private partnership (PPP) model.
Five airport bundles proposed
According to the minutes of the PPPAC meeting held on August 4, the proposed groups are Amritsar with Kangra-Gaggal; Varanasi with Gaya and Kushinagar; Bhubaneswar with Hubballi; Raipur with Aurangabad; and Tiruchirappalli with Tirupati.
“The bundling seeks to enhance the long-term sustainability of smaller airports through cross-subsidisation from the revenues of larger airports,” the minutes said, per a report by Hindustan Times.
The government had earlier privatised six Airports Authority of India-operated airports in 2018-19. The Adani Group won the bids for Ahmedabad, Lucknow, Mangaluru, Jaipur, Thiruvananthapuram and Guwahati airports.
50-year concession proposed
Under the proposed arrangement, the private operator will manage, operate and develop the airports, including passenger terminals and city-side infrastructure. The concession period is proposed to be 50 years.
The Airports Authority of India (AAI) will continue to handle air traffic control and communication, navigation and surveillance services. Its wholly owned subsidiary, AAI Cargo Logistics and Allied Services Company Ltd (AAICLAS), will retain responsibility for cargo operations.
Bidder concentration to be capped
The Aviation Ministry has proposed limiting the number of airport bundles that one bidder can win. The move is intended to “mitigate the risks arising from market concentration and potential over- leveraging, including their possible cascading impact across projects”.
The exact cap is still being worked out and will be submitted for final PPPAC clearance.
The Ministry has also proposed allowing companies with relevant infrastructure experience from sectors beyond aviation to participate in the bidding.
Employees to get initial protection
The proposed structure includes a one-year joint management period involving existing AAI employees. After that, the private concessionaire will have to retain 60% of AAI employees for up to three years.
Before seeking final PPPAC approval, the civil aviation ministry will conduct a market-sounding exercise with infrastructure companies. Feedback from private operators could lead to changes in the proposed bundling arrangement.
AAI will review the responses before the proposal moves ahead.