Aviation minister Praful Patel promised to corporatize the Airports Authority of India (AAI) and then list it on the bourses, a move that he claimed would help the authority meet its funding requirement.
An analyst said corporatizing the agency that operates airports and also regulates them wouldn’t be easy.
AAI operates 125 airports, provides for all of the country’s air navigation and sets tariffs. The Airports Economic Regulatory Authority (Aera) will take over many of AAI’s regulatory functions after it is fully operational.
“We are looking at corporatizing the AAI, turning it into a company from an authority which it is now... Our objective is to list AAI (on the stock exchanges),” Patel said, adding that this would be a three-step process likely to be completed by “next year”.
The profit-making authority will seek permission from Parliament to allow it to be converted it into a company after which it will be registered under the Companies Act and then seek a listing, added Patel. He did not provide any details of what proportion of its equity AAI would divest.
AAI is spending Rs12,434 crore to modernize airports and upgrade air traffic services across the country during the 11th Plan (the five years to 2012) and Patel said the move to list the company will help it raise funds from the market to meet a large portion of the investment required.
Until 2005, 97% of the passenger traffic in the country was controlled by AAI (the other 3% was controlled by the privately held Cochin International Airport Ltd) which now services just 39% of the market after two airports were shut down to make way for new ones and two others were privatized.
The GMR Group and various partners now run the New Delhi and Hyderabad airports accounting for 27% of the market; the GVK Group and its partners, the one in Mumbai, which accounts for 22% of the market; and the Siemens consortium runs the Bangalore airport, which accounts for 6% of the passenger market.
A senior AAI official who didn’t want to be identified said Patel’s announcement was just an idea and there has been no movement on this front though the airport body plans to take up a study on this issue and present it to the ministry. “He has asked us to consider this and we are looking at it,” this official said after the announcement. “But it seems he (Patel) has made up his mind.”
Analyst Robey Lal said the government should look at the proposal carefully, especially since it is likely to be a major move on the lines of the merger of India’s state-run domestic and international carriers into one state-owned carrier, which is ailing. “There were promises (during that merger) and in this case also there will be promises. But (there is) no study presented which shows the economic financial and functional viability of such an act of corporatization of all the civil airports,” said Lal, former country head of the International Air Transport Association.
“You will have to figure out air navigation providers and all that goes with it. Would they be made a separate authority or part of the company? That will decide if the sovereign rights like air space will also be available to be traded on the stock market.”