A decade earlier, foreign visitors landing at Indian airports experienced shock that they related later in horror stories.Today, the situation is vastly different. In New Delhi, Bangalore, Hyderabad and other cities, old airports have been refurbished and new ones are under construction. All this came after overcoming resistance from unions and entrenched bureaucratic interests. Now, there is danger the clock may be turned back.
The premise in allowing the private sector to enter the airport sector was threefold. One, it was felt that private operators could better manage aviation infrastructure than public sector units. Two, given the heavy investment required to upgrade infrastructure, private participation was essential. And finally, it was felt that as the sector expanded, investments would not only be viable but also profitable.
The experience of the past few years have led to a questioning of some of these assumptions. Private operators now find it difficult to get a decent return without imposing extra costs on travellers. Passengers grumble about a variety of levies and taxes they have to pay for enjoying decent flying facilities.
So much so that there is now danger that consumers can be used as a “captive” source of revenue. The airports regulator, the Airport Economic Regulatory Authority (Aera), has resisted this trend. There has been litigation and private operators feel discriminated against.
All this has led to rethinking in government on the approach to regulation in the sector. A Mint story on Thursday detailed how the government is rethinking its approach to regulation, especially with regard to Aera.
This is misguided. Instead of letting Aera do its job, the government wants to side-step it in a bid to attract foreign investment in this area, especially with respect to greenfield airports. The suspicion, however, is that its concerns about Aera’s recent decisions against private operators may have a role in its rethinking on regulation.
The fact is the regulator is not to be blamed: the problem lies with the private operators being unable to gauge costs and returns on investments properly. The government, too, has left gaps in its policies. Blaming the regulator will not solve these problems. If anything, whittling Aera’s authority will harm the interest of consumers.
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