BackAirline role rules out Tatas from bid for operating Chennai airport
Tata Realty and Infra has now asked the civil aviation ministry for a waiver so that it can participate in the bidding
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Mumbai: Tata Realty and Infrastructure Ltd (TRIL) will not be able to bid for the project to privatize Chennai airport because the aviation ministry requires that no related company holds an equity interest that exceeds 5% in an airline firm.
“Given the conditions in the RFQ (request for qualification) documents for the bidding process of Chennai airport, TRIL is not eligible to bid for the Chennai airport," said a spokesman for TRIL, a unit of Tata Sons Ltd.
Tata Sons has recently started a joint venture with Singapore Airlines Ltd to start an airline in India in which the Indian conglomerate has a 51% stake. The enterprise is waiting for final approvals.
TRIL, which bought an RFQ to pick up a 100% interest in Chennai airport privatization programme, has now asked the ministry for a waiver so that it can participate in the bidding.
In September, the aviation ministry decided to privatize six airports which were till recently the recipients of elaborate and expensive facelifts performed by the state-owned Airports Authority of India.
Four of the six metro airports in the country—New Delhi, Mumbai, Hyderabad, and Bangalore—are already run by private operators and the ministry says it now wants the Kolkata, Chennai, Lucknow, Guwahati, Jaipur and Ahmedabad airports to be privatized too.
The $100 billion Tata group has plans to start businesses in the aviation sector that would include operating airports, building an aircraft repair and maintenance facility and developing an information technology backbone for aviation services, instead of restricting itself to just running airlines in India.
Tata Sons had already agreed to join a venture with Malaysia-based AirAsia Bhd and Arun Bhatia of Telestra Tradeplace Pvt. Ltd to form a local low-fare airline that’s waiting for the Indian aviation regulator’s final go-ahead. AirAsia has a 49% stake in that venture, with Tata Sons taking 30% and Bhatia holding the rest.
TRIL had a tie-up with Singapore’s Changi Airport to bid for airport projects in smaller Indian cities.
It has a special focus on real estate projects and other infrastructure projects including airports, urban infrastructure, roads and bridges, etc. An offshore fund of $1 billion is in the process of being set up to finance these initiatives.
“Now, Tata group companies would not be able to bid for any airports in the current format," said a senior airport consultant, requesting anonymity citing the sensitivity of the issue. “Globally, in the private sector, airlines are barred from picking up a stake in airports citing conflict of interest. The government’s view on this is clear and very much in line with international practices," he said.
He added that Tata group can bid for the airport projects only if it floats a special purpose vehicle in such a way that it is adhering to the civil aviation ministry’s norms.
However, a senior Tata group executive, who also requested anonymity, ruled out any possibilities of creating a new structure to bid for airport projects.
“The government has spelled out a condition and TRIL is not eligible to bid for the Airports Authority of India controlled airports under the said conditions. So there is no question of challenging it," he said.
A TRIL spokesperson did not offer any comments when asked if his company has sought for waiver of the said conditions.
“We have not received any request from Tata group on the Chennai airport issue. Once we get a request, we will certainly examine it," said a senior civil aviation ministry official.
On 30 September, Mint had reported that the Tata group has plans to leverage group companies to establish and support its broader interests in Indian civil aviation. The Tata group has over 100 operating companies in seven business sectors including communications and information technology, engineering, materials, services and consumer products.
“There are Tata companies in the infrastructure space. Airport-related projects fall within their interest areas, and they can and do consider participating in such projects," a Tata group spokesperson said in September.
In its application to the Foreign Investment Promotion Board for forming a joint venture with Singapore Airlines, Tata has said its joint venture has plans to engage in domestic and international full-service scheduled passenger airline services in aviation and “to undertake ancillary activities related to airline services including but not limited to air transport carriers (of freight), cargo handling incidental to air transport, renting and leasing (except financial leasing) of aircraft and other services incidental to air transport services".
In an unrelated development on 27 November, the Tata group withdrew its application for a banking licence, months before the Reserve Bank of India is expected to open up the sector to a new set of new private banks in Asia’s third-largest economy.
Tata Sons, the holding company of the Tata group, said in a statement that its “current financial services operating model best supports the current needs of the Tata group’s domestic and overseas strategy, and provides adequate operating flexibility to its companies, while securing the interests of the group’s diverse stakeholder base".
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