1 week ago
Government prepares 11 airports for five private PPP bundles
The government wants private companies to help run 11 airports.
The airports would be grouped into five packages.
Each package would be given to one private company for 50 years.
Bigger airports would be paired with smaller airports so their money could help support the smaller ones.
The private companies are expected to invest Rs 8,622 crore.
They would run and develop the airports, but the Airports Authority of India would continue air traffic control and related navigation services.
Existing airport employees would work with the new operators for one year.
The operators would then have to keep 60 percent of those employees for up to three years.
The government also wants to stop one company from winning too many packages.
This is meant to reduce concentration and financial risks in the airport sector.
The Civil Aviation Ministry plans to lease 11 Airports Authority of India airports through five 50-year public-private partnership bundles.
The proposed bundles pair Amritsar with Kangra-Gaggal, Varanasi with Gaya and Kushinagar, Bhubaneswar with Hubballi, Raipur with Aurangabad, and Tiruchirappalli with Tirupati.
Private concessionaires are expected to invest an estimated Rs 8,622 crore and handle airport operation, management and development.
The government plans to cap the number of bundles won by one bidder because of concerns about market concentration and over-leveraging.
Existing Airports Authority of India employees would receive one year of joint management, while concessionaires would retain 60 percent for up to three years.
- Who
- The Ministry of Civil Aviation, Airports Authority of India, Public Private Partnership Appraisal Committee, existing AAI employees and prospective private concessionaires.
- What
- A proposal to lease 11 AAI airports to private operators through five public-private partnership bundles.
- Where
- The airports are in Amritsar, Kangra-Gaggal, Varanasi, Gaya, Kushinagar, Bhubaneswar, Hubballi, Raipur, Aurangabad, Tiruchirappalli and Tirupati.
- When
- The PPPAC gave in-principle approval on August 4; the AAI Board approved the proposal on May 23, 2022.
- Why
- To bring private capital and expertise into airport operations and development, while using larger airports to support smaller bundled airports and limiting concentration risks.
Concentration concerns
Private participation rationale
Limits on bidder wins
Concentration concerns
The Finance Ministry raised concerns that concentration and over-leveraging by an airport operator could create risks across multiple projects.
Private participation rationale
The Civil Aviation Ministry agreed to cap the number of bundles one bidder can win, while continuing with the proposed private-operator model.
Bundling airports
Concentration concerns
Pairing airports into large bundles could increase the scale of individual concessions and contribute to concentration among major operators.
Private participation rationale
The government says larger airports can cross-subsidise smaller airports, making operations and investment at the smaller facilities more financially viable.
Role of private operators
Concentration concerns
The existing sector is already concentrated among a handful of private players, and one company previously emerged as the highest bidder for all six airports offered in 2018-19.
Private participation rationale
The government is seeking private capital and expertise for airport operation, management and development, while AAI would retain responsibility for air traffic control and communication, navigation and surveillance services.
Key facts
- Airports involved
- 11 Airports Authority of India airports
- Number of bundles
- Five
- Concession period
- 50 years
- Estimated investment
- Rs 8,622 crore
- Bidding parameter
- Per-passenger fee for domestic passengers; the international passenger fee would be twice the domestic fee
- Employee arrangement
- One year of joint management with existing AAI employees
- Employee retention
- Concessionaires would be required to retain 60 percent of AAI employees for up to three years
- Bundle limit
- The cap on bundles awarded to one bidder has been proposed but its exact number is still being finalised
Sources
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