Govt may cap airport contracts at two per firm2 min read . Updated: 19 Jan 2020, 11:18 PM IST
- Plan part of govt’s bid to ensure level playing field in airport privatization
- Move comes after Adani Enterprises snapped up all six contracts in 2019 despite having no experience in running airports
New Delhi: Private bidders vying for future airport privatization projects are likely to be restricted to a maximum of two contracts in each round of auction, two government officials said.
The proposed rules are set to be implemented before the next round of airport privatization that the government is planning, the officials said on condition of anonymity.
“A list of projects to be bid out in the near future and the modalities of the auction will be finalized very shortly. Discussions are on in the direction of limiting award of concessions to two per developer," said one of the officials.
The review of the rules comes after Adani Enterprises Ltd, the company controlled by billionaire Gautam Adani, snapped up all six contracts for upgrading airports in 2019 despite having no experience in running them. This, the government believes, had made it vulnerable to accusations by opposition parties of favouring a particular company.
The idea, officials explained, is to ensure that privatizing civil aviation infrastructure in the fast-growing domestic market steers clear of political controversies. Although airport development concessions are awarded through a process of competitive bidding to private players, which take the investment risk of redeveloping facilities, officials concede that the government is being extra cautious because it does not want the modernization process to be disrupted by legal challenges.
“Limiting the number of projects to be awarded to one player in an auction seems to be a fair approach as there will not be a dependence on a few groups," Anupama Arora, vice president and sector head of corporate ratings at ICRA Ltd, said, adding that it is also important to have experienced airport operators as part of the consortiums modernizing them.
The government plans to privatize about 30-35 airports in phases over the next five years. These, along with the greenfield projects to be initiated during the same period, will see about ₹1.4 trillion of investments flowing into airport infrastructure, according to government estimates.
Operation of India’s airports is now dominated by the state-run Airports Authority of India (AAI).
The ambitious privatization plan, under which the right to manage airports will be granted for about 50 years based on a revenue sharing (per passenger) model, is also part of the government’s efforts to attract investments into the economy, add new jobs and meet growing demand.
Currently, about 25 of the 50 busiest airports in the country operate at near-full capacity. The government is aiming to connect smaller cities by building new airports and upgrading existing ones.
Last year, the government initiated the privatization of six airports in which Adani Enterprises emerged as the highest bidder in terms of revenue per passenger to be shared with AAI.
Letters of award have been issued in the case of Ahmedabad, Lucknow and Mangaluru airports to the highest bidder.
Awarding operation, management and development rights in the case of three others—Jaipur, Guwahati and Thiruvananthapuram airports—which got delayed due to various issues, is being resolved.
“Privatizing airports is a great initiative and our experience so far has been excellent. We get better infrastructure and service, apart from revenue to the exchequer," said Dhiraj Mathur, a former civil servant and senior adviser-sustainable infrastructure at PTC India Financial Services Ltd. “Award of airports through competitive bidding is a very transparent affair. There is nothing wrong in one investor winning more than one project but it is the government’s discretion to set the norms."