1 week ago
India Plans Cap on Airport Bundle Wins Amid Concentration Concerns
India wants private companies to operate 11 government-run airports.
The airports will be grouped into five packages, with each package containing two or three airports.
Busy airports will be paired with smaller airports that may not make as much money.
Earnings from a busy airport could help pay for the smaller airports.
The government is worried that too few companies control too much of the airport business.
It is also worried that one company could borrow too much money to run many airports.
To reduce these risks, one company may be stopped from winning too many packages.
Officials have approved the plan in principle, but they are still deciding the exact bidding rules.
The government plans to privatise 11 Airports Authority of India airports in five bundles under the public-private partnership model.
The Civil Aviation Ministry says the number of bundles awarded to one bidder will be capped, but the limit has not been finalised.
The bundles pair larger, revenue-generating airports with smaller airports that may require cross-subsidisation.
The Public Private Partnership Appraisal Committee granted in-principle approval on August 4, pending further market consultation and a final recommendation.
The proposed cap responds to Finance Ministry concerns about aviation-sector concentration, excessive borrowing and risks spreading across multiple projects.
- Who
- The Ministry of Civil Aviation, the Ministry of Finance, the Public Private Partnership Appraisal Committee and prospective private infrastructure operators.
- What
- The government is preparing to offer 11 Airports Authority of India airports in five private concession bundles and plans to cap how many bundles one bidder can win.
- Where
- The proposed bundles cover airports at Amritsar-Kangra, Varanasi-Gaya-Kushinagar, Bhubaneswar-Hubballi, Raipur-Aurangabad and Tiruchirappalli-Tirupati in India.
- When
- The Public Private Partnership Appraisal Committee considered the proposal on August 4; market consultations and the final recommendation are still pending.
- Why
- The cap is intended to reduce market concentration, limit over-leveraging and prevent financial problems at one operator from affecting several projects.
Key facts
- Airports offered
- Eleven Airports Authority of India airports are proposed for privatisation.
- Airport bundles
- Amritsar-Kangra; Varanasi-Gaya-Kushinagar; Bhubaneswar-Hubballi; Raipur-Aurangabad; and Tiruchirappalli-Tirupati.
- Concession period
- The proposed concessions would run for 50 years.
- Bundle responsibility
- A single concessionaire would operate, manage and develop all airports in its awarded bundle.
- Cross-subsidy model
- Revenue from higher-traffic airports could help cover operating and capital costs at smaller airports.
- Proposed safeguard
- The number of bundles awarded to one bidder would be capped, although the exact limit is still under development.
- Approval status
- The Public Private Partnership Appraisal Committee granted in-principle approval; the Civil Aviation Ministry plans market outreach before seeking a final recommendation.
- Bidding framework
- The proposed bidding parameter is a per-passenger fee for domestic passenger throughput, with one-stage short-listing.
Quotes
Public Private Partnership Appraisal Committee Chair
Chair of the Finance Ministry’s committee reviewing the airport PPP proposals
“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 modalities of such capping are being finalised and would be submitted as part of the proposal seeking final recommendation by the PPPAC.”
CNBC TV 18
indianexpress.com
“Considering the nature and breadth of the Concessionaire’s obligations under the instant proposal, and consistent with the decisions taken by the PPPAC at its 85th meeting, it is proposed to permit participation by bidders with relevant cross-sectoral infrastructure experience.”
indianexpress.com
Sources
Airport Privatisation Plan May Limit Bids, Finance Ministry Flags Rising Market Concentration In Aviation Sector
Airport privatisation: MoCA plans cap on airports a bidder can win
‘Oligopolistic nature’: Govt wants to cap number of airports an operator can run
Centre plans to cap airports awarded to bidder in next privatisation round
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