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First regulate, then privatize airports

First regulate, then privatize airports
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First Published: Thu, Apr 05 2007. 12 56 PM IST
Updated: Thu, Apr 05 2007. 12 56 PM IST
PTI
Singapore: With India going whole hog with airport privatization, a timely warning has come from a top global aviation official who has said that the worldwide experience is marred with “very grave risks” and a tough regulator is essential to ensure proper functioning of private airports.
“Few years ago, we favoured privatization of airports, but unfortunately the experience was fraught with grave risks. This experience should act as a wake-up call for all governments and should put in place tough regulator mechanisms,” director general and CEO of International Air Transport Association (IATA) Giovanni Bisignani said in an interview.
To draw his point home, he referred to the airport privatization experiences of the UK, Mexico, Hong Kong and other nations where either the absence of a regulator or the regulator’s “inefficiency” led the private operator to make huge profits by hiking user charges substantially and providing no benefits to the consumers.
The IATA chief’s comments came weeks ahead of the Indian government’s plans mentioned in the Airport Economic Regulatory Authority Bill presented in the Parliament during the second part of the on-going Budget Session.The Left parties and airport unions have also been opposing privatization of airports.
Bisignani said while aviation infrastructure has to be constructed very fast in India, “let us be careful about the role of the private parties. The airport regulator should be independent and have a strong mandate.”
“If the private parties do not fulfil their part of the commitments, there should be a provision in the agreement that the agreement itself can be withdrawn,” he said, stressing the need to have appropriate regulations in place before allowing private firms to get into the airport business.
The Mexican experience, he said, had shown that the private companies, which had committed to invest a certain amount of money, did not do it but continued to increase user charges and made considerable profits, he said.
The IATA chief also referred to the London-Heathrow airport private process and said the airport regulator’s handling of the situation is “inefficient” and “ineffective”. This had led private parties to make high profits often at the cost of the end consumer.
“Private investors could also not abuse the monopolistic situation,” Bisignani said and referred to the Hong Kong experience where “IATA finally won the battle” and convinced the local government not to go ahead with privatizing the airports.
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First Published: Thu, Apr 05 2007. 12 56 PM IST