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Chennai airport image courtesy AAI 
United Progressive Alliance (UPA) Government’s controversial attempt to privatize six airports has drawn flak from the Board of Directors of Airports Authority of India (AAI).This is expected to inspire AAI employees to up the ante against privatization.
 
At its Board meeting held in December 2013, certain members supported the recommendation of a Parliamentary Standing Committee (PSC) that construction, operation and maintenance of airports should remain with AAI. PSC on Transport, Tourism and Culture has also recommended that AAI “should be empowered to take decisions to generate resources rather than handing over the core activities of the airports newly constructed with public money to the private players.”
 
According to informed sources, the newly inducted nominee of Ministry of Civil Aviation on the AAI Board sought to restrain other directors from taking a stand on the PSC’s recommendations. The official, an IAS officer, contended that it was for the Government to take suitable action on such recommendations. AAI board need not take any stand on PSC’s recommendations.
 
He also claimed that the decision to privatize the six airports at Chennai, Kolkata, Ahmedabad, Jaipur, Lucknow and Guwahati has been taken by the Government and AAI.
 
At this, certain directors wanted to put on record their stand against privatization. The Board has thus officially placed on the record the fact that certain members agreed with PSC’s recommendations that AAI may be permitted to manage and operate the six airports as it had the requisite capabilities.
The Board also decided to inform the Ministry of Civil Aviation about the reservations voiced by certain directors against privatization. The Board agreed to seek the Government’s final view on the issue.
Everyone in the aviation sector knows that the decision to privatize the six airports has been thrust by the Government on AAI. The latter never ever demanded privatization.
It remains to be seen whether the Government would once again extend the last date for submission of bids for separate tendering invitations for Operation, Management and Transfer of six airports through Public Private Partnership (PPP) of the six airports. The extended date at present is 17th March 2014.
There is a ray of hope that scams-tainted UPA Government might shelve the tendering process to avoid further damage to its dwindling prospects at the forthcoming polls for Lok Sabha (lower house of Parliament).
In its report on ‘Privatization of Services at Airports’ presented to Parliament on 20th November 2013, PSC stated: “The Committee is dismayed that instead of strengthening AAI by giving it much needed financial and administrative autonomy to enable it to take its own decisions without being influenced/advised by either the Ministry or the Planning Commission, a decision to give our airports on platter to private parties was taken. The Committee fails to understand the logic behind privatizing all these airports after spending tax payers’ money. The public utilities created by public fund cannot be given to private parties for commercial considerations.”
It added: “The Committee finds it strange that AAI is now being forced to build, operate and manage smaller and non-metro airports which are loss-making. Thus, with the metro and other profit-making airports going to private people, AAI will be left with economically unviable ones. Earlier, Airports Authority of India was in a position to off-set the losses of non-metro airports by revenue earned from metro airports through cross-subsidy. The Committee fails to understand how the AAI will be able to carry out its mandate with the depleted resources. Other lucrative activities of AAI are being taken out and being given to a separate corporation.”
It recommended that “AAI may be permitted to manage and operate all its airports, including the loss-making ones, with a rider that there should be time bound delivery of world class passenger services in a more efficient and transparent manner, matching with those being rendered by private airport operators.”
PSC’s foresight about loss-making airports can be appreciated by looking at the fact that AAI intends to approach the Union Government and States for grants and subsidies for development of 50 low-cost small airports with relaxed viability criterion.
Apart from capital grant for part funding of the project, AAI wants the Government to fund the operational deficit/loss through annual revenue grants.
MCA’s proposed policy for regional and remote air connectivity provides for levy of minimum or zero aerodrome tariff and other charges on airlines that operate from small airports.
Informed sources quoted AAI as contending that all the 50 airports proposed by MCA would be “loss-making and financially non-viable”. The internal rate of return (IRR)
 for such projects may be negative or below 8%, which is well below the 12% norm stipulated by Public Investment Board (PIB).
 (Published at indianairtransport.wordpress.com on 5th March 2014)
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