New Delhi: Finance minister Arun Jaitley has cleared a key land reform that will open up portions of 50,000 acres of urban airport land for building multiplexes, shopping centres and convention centres.
Jaitley on Wednesday said the Airports Authority of India Act will be amended to “enable effective monetization of land assets" and the resources raised from the land will be used for upgrading airports.
In essence, the Airports Authority of India (AAI), which owns most of the country’s 125 airports and holds 50,000 acres of urban airport land, will now be able to change the land usage policy. So far, airports were allowed to use their land only for airport-related activities such as car parking, hotels etc.
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“We will now be moving to change statutory provisions which are there for sale of land. There is demand in the market for multiplex, shopping centers," AAI chairman Guruprasad Mohapatra said. “Even a small part of it (50,000 acres) for development in urban areas will be a lot."
AAI manages 125 airports in the country of which 80 are currently operational. Airports typically earn revenue from aeronautical activities such as navigation charges from airlines and non-aeronautical ones such as car parking and hotels.
Globally, non-aeronautical revenue makes up 40-45% of the total mix while in India this figure is only 25%, Mohapatra said. “This means airlines will pay less and so will passengers over time. Eventually this will be good for the sector," he said.
Jaitley also announced that select airports in Tier-II cities will be handed over for operations and management under a public private partnership or PPP mode. This is likely to be in continuation of AAI’s recently announced policy.
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Mohapatra said the Ahmedabad and Jaipur airports have already been tendered out for management of operations by the private sector and the process will culminate by March. Based on how this works, more airports will be given out from next year.
Sidharath Kapur, president of GMR Airports Ltd, said change of land use was a big move. “This is excellent from the point of view of infrastructure deficit in the country and this land reform will go a long way in improving the viability of the airports sector," Kapur said.
GMR runs India’s largest airport by traffic at Delhi, besides Hyderabad, and is set to start construction of Goa’s second airport soon. “It’s a feel good budget," Kapur said. “Besides direct benefits to the airport sector, the 34% growth in tax revenue is a very positive success coming out of demonetization."
Former AAI chairman V.P. Agrawal estimates only 3-5% of the land may be available for building multiplexes as there are aeronautical needs and some airport land is also encroached. “Shopping complexes will work very well at major airports but not in smaller airports," he said.
Besides these two key announcements, Jaitley also said that there would be no service tax on the amount of viability gap funding (VGF) payable to the airline operator for providing flights embarking from or terminating in a Regional Connectivity Scheme (RCS) airport, for a period of one year from the date of commencement of operations of the RCS airport as notified by civil aviation ministry.
Jaitley also announced budgetary support of Rs1,800 crore for Air India as part of the Rs30,000 crore equity infusion announced for a 10-year period in 2012. Air India had sought Rs2,844 crore for this fiscal or about 63% more. An airline official who did not wish to be named said this will now push Air India further into debt as it will have to raise loans to meet the deficit and pay its lenders.