Privatisation of six more airports – Amritsar, Varanasi, Bhubaneswar, Indore, Raipur and Trichy – will start by mid-2021

GOI divests itself of maintenance of six more airports

GOI divests itself of maintenance of six more airports
GOI divests itself of maintenance of six more airports
Red Book on Sale!

Six more airports to be Privatized

After the privatisation of major six airports a previous year, Airports Authority of India (AAI) on Tuesday said that the privatisation of six more airports – Amritsar, Varanasi, Bhubaneswar, Indore, Raipur and Trichy – will start by mid-2021. “As far as the next round of airports’ privatisation is concerned, we are at the final stages of obtaining government approvals. Once the approvals are received, I think we will start the process of bidding in the first quarter of 2021,” said AAI Chairman Arvind Singh.

In the first round of airports’ privatisation under the Narendra Modi Government, the Adani Group in February bagged contracts for six airports — Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati — winning the bids by huge margins. After signing the concession agreements for three airports — Lucknow, Ahmedabad and Mangaluru — the AAI handed them over to the Adani group earlier this year. The concession agreements for the remaining three airports would be signed in the first half of next month, Singh said.

Now the bidder is decided on a per-share from passenger to avoid malpractices in the revenue share model by under-invoicing. Gautam Adani led Adani Group bagged all the six airports by offering the highest passenger per share to AAI.

History of India’s Airport privatization

The AAI, which works under the Ministry of Civil Aviation, owns and manages more than 100 airports across the country. In 1994, Kochi airport became the first airport in the country to be constructed as a private airport with the support of Kerala State Government, which later recently in 2018 constructed another airport in the state – Kannur Airport – with public and private participation.

The AAI started privatization of its airports in 2006 by bidding out Delhi to Grandhi Mallikarjuna Rao (GMR) Group and Mumbai to Gunupati Venkata Krishna (GVK) Group in 2006. At that time the winner was selected on who offered the maximum revenue share. These two groups offered around 45% of the revenue share and bagged the contracts for India’s two biggest airports. Then GMR bagged Hyderabad Airport and Siemens bagged Bangalore airport constructions and later Siemens control went to GVK Group. In Delhi Airport, GMR Group is estimated to give annually more than Rs.2000 crore to AAI. Later GVK was caught by the Comptroller and Auditor General (CAG) and later Central Bureau of Investigation (CBI) for malpractices in under-invoicing revenue and offering less money to the government. Now GVK Group is on the path of selling its stake in running Mumbai Airport to Adani Group, which recently started acquiring many airport managements.

Now the bidder is decided on a per-share from passenger to avoid malpractices in the revenue share model by under-invoicing. Gautam Adani led Adani Group bagged all the six airports by offering the highest passenger per share to AAI. In Thiruvananthapuram Airport, Adani quoted around Rs.169 per passenger and in all other five airports – Lucknow, Ahmedabad, Jaipur, Mangaluru, and Guwahati – the group outperformed competitors.

However, Adani Group lost the bid for the new airport Jewar Airport (in Noida, a few kilometres from Delhi Airport) construction to Zurich Airport. Uttar Pradesh Government is the custodian of this new Jewar Airport under public-private participation model. The AAI will now concentrate on the construction of new airports across the country by using the income from the privatization of these major airports.

Team PGurus

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