Home >Politics >Policy >Airport contract may breach norms: Iata

New Delhi: The norms being set by India’s aviation ministry to privatize six airports are in breach of a government report and may raise costs, hurting airlines and passengers, according to the International Air Transport Association (Iata), which represents about 240 airlines.

India plans to hand over the Chennai, Lucknow, Kolkata, Ahmedabad, Jaipur and Guwahati airports that were recently modernized at a cost of $1 billion to private operators for a period of about 60 years. Nearly a dozen companies, including Tata group, GMR Infrastructure Ltd and GVK Power and Infrastructure Ltd, have showed interest at a pre-bid conference in September for these airports.

Geneva-based Iata sent its views to Gajendra Haldea, an adviser on infrastructure to Montek Singh Ahluwalia, deputy chairman of the Planning Commission, aviation secretary K.N. Srivastava and Yashwant Bhave, chairman of the airports regulator on 15 October, in response to the model concession agreement prepared by the Planning Commission for airport privatization, which is being drafted in consultation with the aviation ministry.

The views of all stakeholders are being considered, said a aviation ministry official who declined to be named. There will be many more talks before a final agreement is reached, he said.

Iata, a trade association representing airlines that account for 84% of total global air traffic, said in its 30-page letter that the concession agreement prepared so far is not only for operation and management of an airport to be privatized, but also for development of airports, which is at variance with the Planning Commission’s report prepared by a task force under the chairmanship of B.K. Chaturvedi and published in July 2012.

“The task force report has clearly set out that only operations and maintenance of airports will be awarded to the concessionaire, as the AAI (Airports Authority of India) has already invested substantial amount of taxpayer money in airports at metro cities like Chennai and Kolkata and at 27 non-metro airports, where the development works have already been completed," IATA said.

It said that the ministry appears to have “ignored the task force report which in fact does not favour PPP (public-private partnership) for aspects where the public sector has already funded the modernization of the airport facility".

The aviation ministry did not reply to an email seeking comments.

“The model concession agreement has been prepared after extensive consultations with all stakeholders, including IATA. These comments are an afterthought," Haldea said. “The concerns will be addressed by the civil aviation ministry as the model agreement is now being steered by them."

The civil aviation ministry has differences with the Planning Commission on several clauses of the model concession agreement, the aviation ministry official said.

Iata has submitted an analysis of the impact of private participation in Chennai International Airport to demonstrate that the ministry’s approach for privatization is flawed to the extent that it defeats the objective of PPP and is contrary to the government of India’s established principle to not allow supernormal profits to a private participant.

“It is evident from the following analysis that the impact of offering the aggregate revenue requirement arrived by AERA (Airports Economic Regulatory Authority) for CIA (Chennai International Airport) to the new concessionaire leads to generation of supernormal profits for the concessionaire at the expense of the users and the Authority," Iata said.

In Chennai, AAI has spent 2,325 crore of taxpayer funds, Kolkata 2,015 crore, Ahmedabad 330 crore, Lucknow 175 crore, Jaipur 150 crore and Guwahati 136.43 crore for modernization.

Iata said the airport privatization agreement “seeks to posit wholesale privatization of airports as the panacea for all issues faced by the Indian civil aviation sector".

The Air Passengers Association of India (APAI) said the move will make passengers pay more and government was rushing into it. “How will the government benefit from privatization, especially considering the fact that these are invaluable assets?" APAI president D. Sudhakara Reddy asked. “When modernization has just been completed on all the six airports, how does the government and the taxpayer benefit from this?"

Kirthi V. Rao contributed to this story.

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