New Delhi: The Central government has giving an in-principle approval to a proposal to offer 11 Airports Authority of India (AAI) airports to private operators under the public-private partnership (PPP) model.
The Public Private Partnership Appraisal Committee (PPPAC) approved the proposal at its 149th meeting held on August 4, according to officials.
The airports will be offered in five bundles: Amritsar with Kangra-Gaggal; Varanasi with Gaya and Kushinagar; Bhubaneswar with Hubballi; Raipur with Aurangabad; and Tiruchirappalli with Tirupati.
The bundling approach is intended to pair commercially stronger airports with smaller or less profitable ones, allowing the private concessionaire to use revenues from the larger airport to support investment and operations at the smaller facility.
The proposed private investment is estimated at Rs 8,622 crore, with the Bhubaneswar-Hubballi bundle requiring the largest investment at around Rs 2,725 crore, followed by Varanasi-Gaya-Kushinagar at Rs 2,467 crore.
The other three bundles are estimated to require around Rs 1,496 crore for Raipur-Aurangabad, Rs 1,411 crore for Tiruchirappalli-Tirupati and Rs 523 crore for Amritsar-Kangra.
The investment will cover capital expenditure, including spending already sanctioned by AAI as well as additional capacity expansion requirements.
According to the PPPAC-related reporting, sanctioned capex will have to be completed within three years of the commencement of commercial operations, while subsequent expansion will be linked to traffic and capacity thresholds prescribed under the Airports Economic Regulatory Authority framework.
50-Year Concessions
The proposed concessions will give private operators long-term rights to operate, manage and develop the airports, rather than transfer ownership of the assets.
Under the PPP structure, AAI will continue to own the airports, while the private concessionaire will be responsible for operations and development during the concession period.
Bidding is expected to be based on a per-passenger fee linked to domestic passenger traffic, according to reports. The government is also proposing a cap on the number of bundles that a single bidder can win.
The proposed cap is significant given the increasing concentration of India’s privately operated airport sector.
The Finance Ministry has raised concerns over the “oligopolistic nature” of India’s aviation sector, prompting the Civil Aviation Ministry to propose limits on the number of airport bundles that a single bidder can secure.
Private airport operations in India are already dominated by Adani and GMR. Business Standard reported that the two groups together account for more than half of India’s air passenger traffic through their airport operations.
The government is also said to be considering the bundle cap specifically to reduce risks related to market concentration and over-leveraging.
Following the PPPAC’s in-principle approval, the Civil Aviation Ministry is expected to undertake market sounding and engage with infrastructure players before moving towards the bidding process.
Employee Transition
The proposed transaction also includes measures aimed at ensuring a smoother transition from AAI management to private operators.
According to reports, the ministry has proposed a one-year joint management period involving existing AAI employees after the handover. Private concessionaires would subsequently be required to retain 60 per cent of AAI employees for up to three years.
Such provisions are intended to minimise disruption during the transition and build on arrangements used during the previous airport privatisation round.
Third Major Airport Privatisation Push
The proposed transaction marks another major step in India’s airport privatisation programme.
The government previously awarded six AAI-operated airports to private players in 2018-19.
With PPPAC approval now in place, the proposal will move towards the next stages of transaction preparation, including market engagement, bidding documentation and the requisite government approvals before private concessionaires can be selected.
If implemented, the 11-airport programme would significantly expand the footprint of private airport operators in India while putting competition, regional connectivity and long-term infrastructure investment at the centre of the country’s next airport privatisation cycle. (BVI)
