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Government gives final approval to privatise 13 airports

September 9, 2021 03:09 PM

privatise 13 airports
The government aims to generate RS 3,660 crore of private investment into the airports by FY 24

The board of Airport Authority of India has given approval to privatise 13 airports- the first major asset monetisation exercise by the government as part of the National Monetisation Pipeline.

The government aims to generate Rs 3,660 crore of private investment into the airports by FY 24.

Sources said that the AAI board has approved to privatise six major airports- Bhubaneshwar, Varanasi, Amritsar, Trichy, Indore, Raipur and seven smaller airports- Jharsuguda, Gaya, Kushinagar, Kangra, Tirupati, Jabalpur and Jalgaon airports which will be clubbed with the six airport in order to entice investors with high scale and size.

AAI will now appoint a consultant to prepare the bid document which will determine the concession period and reserve price. The bids are likely to be called by early 2022.

This is the first time the model of clubbing major airport with smaller ones will be used in the airport privatisation exercise. “To ensure commensurate development of non-profitable airports along with the profitable airports with the help of private sector investment and participation, pairing /clubbing of smaller airports with each of the six bigger airports and leasing out as a package is being explored,” the National Monetisation Pipeline document prepared by Niti Ayog said.

While Jharsuguda airport will be bundled with Bhubaneswar, Kushinagar and Gaya airports will be clubbed with Varanasi, Kangra, Amritsar, Jalgaon and Trichy airports will be clubbed with Raipur Jabalpur, Indore, and Tirupati airports respectively.

Also Read : Aviation Ministry earmarks Rs 20,000 cr for airport development

Prospective investors and consultants that Business Standard spoke to said that large investors are unlikely to show much interest as these are smaller airports with limited size and scale.

However, they pointed out that Varanasi along with Gaya and Kushinagar will attract investor interest as all three airports fall on the Buddhist circuit and have potential to attract international passengers.

The Buddhist Circuit is a route that follows in the footsteps of Buddha from Lumbini in Nepal where he was born, through Bihar in India where he attained enlightenment, to Sarnath and Kushinagar in Uttar Pradesh in India, where he gave his first teachings and died.

“Instead of the entrenched operators like GMR or Adani group, there is a possibility that we may see the entry of other smaller groups, possibly local infrastructure groups based in the cities where the airport are located,” an executive of an infrastructure firm said.

In the last round of privatisation, Adani group bid aggressively to win all six airports- Ahmedabad, Jaipur, Lucknow, Thiruvananthapuram, Mangaluru, and Guwahati. The bid amount in some cases was double that of the second highest bid.

According to rating agency ICRA, the aggressive bidding would result in a windfall for the AAI, which could earn more than Rs 600 crore per year as concession fees from the Adani group.

However, a senior government official involved in NMP said that the government had done a study and gauged investor appetite in airport projects following the impact of COVID-19 on aviation. The study showed that despite the decline in passenger traffic and revenue of airports due to the pandemic, investor interest continues to remain stable in airports.

Further regulatory regime followed in India under which airport developers get a stable return on investments to upgrade assets through passenger fees, landing and parking charges and fuel charges, remains fairly visible and stable which gives assurance to investors. Airport charges in India are regulated by the Airport Economic regulatory Authority, which allows for a stable return on aero assets and true-up of aero revenue.

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