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India is set to invite bids early next fiscal year from private enterprises for the next round of redevelopment of airports, underscoring the government’s view that the civil aviation sector will gradually steer out of the turbulence caused by the pandemic.

“The pandemic affected industries in two ways—one is in a permanent way, the other a temporary blip. The impact on aviation is a temporary one. A visit to airports will confirm this," said a government official, who spoke on condition of anonymity.

He said the current cap on aircraft capacity utilization of airlines will not hinder investor interest in airports.

Overall, India has lined up a major privatization drive for the next fiscal of 1.75 trillion after having missed this fiscal’s target of 2.1 trillion due to the disruptions caused by the pandemic. Of the next year’s aim, as much as 1 trillion is targeted from stake sales in state-run banks and financial institutions. Monetizing physical assets will also form a crucial part of the privatization move, with the proceeds going towards infrastructure creation.

The civil aviation ministry’s plan is to privatize about 30-35 airports over the next five years. The airports in Varanasi, Bhubaneshwar, Amritsar, Indore, Raipur and Trichy will be part of the next round of privatization.

The government is likely to face the uphill task of attracting sufficient bidders for these six airports as they are located in smaller cities, which allows limited alternative revenue generation potential for private investors. This can act as a dampener to bidders, who are not pure-play airport developers. Besides, there is still some uncertainty on the timelines for the rebound of traffic to pre-covid levels at tier-II and tier-III locations.

The civil aviation ministry did not respond to requests for comment.

The next round of airport privatization may not be an easy task considering the continued disruptions due to the pandemic, according to industry observers.

“As things stand, the aviation industry—airlines and airport operators alike—has been adversely affected by the pandemic. So, companies will definitely not go out of their way to make high bids like last time around," a senior industry official said, on condition of anonymity.

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