The Centre expects at least ₹8,600 crore investment from the planned privatization of 11 airports, with permission for infrastructure companies and other non-airport operators to bid subject to certain caveats, a document reviewed by Mint shows.
Seven years after India privatized six airports, the department of economic affairs has given an in-principle approval to privatize 11 airports, including Varanasi, Amritsar and Bhubaneswar. In a departure from previous rounds, the current plan is to club a larger or profitable airport with a smaller or loss-making one, minutes of a 4 August meeting of the Public Private Partnership Appraisal Committee (PPPAC) showed.
The investment will not necessarily be deployed entirely upfront; the winning bidder will invest as sanctioned by the Airports Authority of India (AAI) and incur additional expenditure for capacity expansion. The capex is to be undertaken within three years of the commercial operation date, while subsequent expansion will be linked to traffic and capacity thresholds decided by the Airports Economic Regulatory Authority (Aera). The proposed structure also gives concessionaires access to city-side development, with land to be made available for such development and the area and permissible use to be specified in the bid documents.
According to Gurmukh Singh Bawa, secretary general, air travellers association, privatization will help push infrastructure development in the sector. “With infrastructure companies being allowed to bid, subject to conditions, we can also have a scenario where foreign airport operators come in, form partnerships with Indian companies to manage airports. We need to see how the modalities work out,” he said.
Interestingly, New Delhi is also looking to put in checks and balances on the number of airports a private operator can operate. “The number of airport bundles that may be awarded to a single bidder would be capped to mitigate the risks arising from market concentration and potential over-leveraging, including their possible cascading impact across projects,” the minutes noted. Modalities of such capping are being worked out, the minutes said.
Similarly, the government is looking to widen the pool of bidders beyond traditional airport operators. It wants to allow select infrastructure companies to bid for projects too, but these would be subject to certain caveats and fulfilment of conditions, including technical expertise requirements.
“Accordingly, eligible technical experience would not be restricted exclusively to the aviation sector and would be assessed with reference to the infrastructure sub-sectors included in the harmonised master list of infrastructure,” it noted.
Simply put, a company with experience in other recognized infrastructure sectors, such as roads, ports, power, or railways, could also be considered as having relevant expertise, subject to tender rules.
The proposal comes after the government’s previous major brownfield airport privatization round in 2019, when six AAI airports—Ahmedabad, Lucknow, Mangaluru, Jaipur, Guwahati and Thiruvananthapuram—were offered on 50-year concessions. The Adani group emerged as the successful bidder for all six airports, expanding its presence rapidly across India’s airport sector.
Privatization of Delhi and Mumbai airports happened in 2006.
At present, the state-run AAI is India’s largest airport operator with 129 airports, followed by Adani Group which manages eight—that include six mentioned above, the Mumbai airport and the Navi Mumbai airport. The other large private airport operator is GMR Airports—which manages five: Delhi, Hyderabad, Mopa in Goa, Nagpur and Bhogapuram.
This apart, the Noida International Airport at Jewar is managed by Zurich Airport Ltd and Bengaluru airport is managed by Fairfax-owned Bangalore International Airport Ltd (Bial).
Incidentally, the government’s financial model estimates project internal rates of return (IRR) of 10.7-12% for the five airport bundles and equity IRRs of 16.7-18.6%, indicating the returns it expects private investors to earn on the equity deployed in the projects.
The Varanasi-Gaya-Kushinagar bundle has the highest estimated equity IRR at 18.6%, while the Tiruchirappalli-Tirupati and Raipur-Aurangabad bundles have the lowest at 16.7%.
Equity IRR refers to the annualized return expected on the investor’s equity based on the timing and size of its investment and the cash flows generated by the project. It is different from project IRR, which measures the return generated by the overall project. The figures are estimates from the government’s financial model and the document does not provide enough underlying assumptions to independently reconstruct them.
Queries emailed to the civil aviation ministry remained unanswered.