1 week ago
India’s Aviation Oligopoly Exposes Weak Airport Regulation and Competition
India’s airport business is increasingly controlled by a small number of large organizations.
This can make it harder for smaller companies to compete.
The finance ministry is worried that one or two companies could win too many airport contracts.
A private company called Adani won six airport contracts in 2019.
India has a regulator called the Airports Economic Regulatory Authority of India, or AERAI.
However, a later law reduced the number of airports that AERAI could supervise.
The government said this would help the regulator focus on the busiest airports.
Critics say the regulator should instead have been given more staff and stronger powers.
They believe limiting how many airports one bidder can win would help, but would not solve the deeper problem.
The finance ministry has warned that a few companies could dominate airport contracts and create excessive concentration.
Adani Airport Holdings, GMR Airports and the state-owned Airports Authority of India are the sector’s three largest players.
Adani won contracts to operate six major airports in 2019 and took them over between October 2020 and November 2021.
A 2019 amendment narrowed the Airports Economic Regulatory Authority of India’s oversight from 33 airports to 16.
The article argues that strengthening the regulator, rather than only capping contracts, is necessary to restore competition.
- Who
- The Ministry of Finance, the Ministry of Civil Aviation, AERAI, Airports Authority of India, Adani Airport Holdings and GMR Airports are central to the issue.
- What
- Officials are examining airport contract concentration and the regulatory weaknesses contributing to India’s aviation oligopoly.
- Where
- India’s civil aviation and airport sectors.
- When
- Concerns were raised at a recent inter-ministerial PPPAC meeting; key developments occurred in 2008, 2019 and from 2020 to 2021.
- Why
- The finance ministry is concerned that a handful of operators could dominate airport contracts, increase concentration and become over-leveraged.
Regulatory Critique
Government Position
Effect of the AERAI amendment
Regulatory Critique
Critics argue that raising the passenger threshold and limiting coverage weakened AERAI and removed some recently privatised airports from its oversight.
Government Position
The government said passenger growth meant the higher threshold still left only about 1.3% of total air passengers outside AERAI’s regulation, so its effective role had not been diluted.
How to address concentration
Regulatory Critique
The article argues that a bidder cap would address only the symptom and that AERAI needs greater powers, staff and independence.
Government Position
The Ministry of Civil Aviation outlined a plan to cap the number of airports awarded to a single bidder, although the precise limit was not immediately clear.
Role of market-based tariffs
Regulatory Critique
Critics say AERAI should retain independent monitoring and periodic review of tariffs, even when tariffs are set through bidding or predetermined arrangements.
Government Position
The government’s approach treated market-based or bid-determined tariffs as reducing the need for direct AERAI regulation, while retaining advance consultation with the regulator.
Key facts
- Largest airport players
- Airports Authority of India, Adani Airport Holdings and GMR Airports.
- Airports Authority of India
- Manages 129 airports handling less than half of India’s air passengers.
- Adani Airport Holdings
- Operates eight airports, including two in Mumbai, handling about 25% of India’s air passengers.
- GMR Airports
- Operates Delhi, Hyderabad and Goa airports among others, handling about 27% of passengers.
- AERAI’s original remit
- The 2008 law placed airports with more than 1.5 million annual passengers under the regulator; about 33 airports were covered.
- 2019 airport privatisation
- Adani won contracts for Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati airports.
- Regulatory change
- A later amendment raised the threshold to more than 3.5 million annual passengers and reduced AERAI’s coverage from 33 airports to 16.
Sources
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