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By
R.N.Bhaskar
Jan 2008 (published in the
DNA).
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The aviation
ministry does not allow
AAI to compete with private players in biddging for projects
overseas, or even in India.
The ministry
has waived all aprport
charges for aircraft with 80 seats or less. This will hurt AAI's
revenues.
The ministry
does not intend to charge
private airports any annual fee for being granted the permission to
operate an airport and regulate the skies.
The ministry
has yet to formulate a
clear policy for private airports.
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The markets are ecstatic. The
growth
in domestic passenger traffic during 2007 was spectacular: “It
grew by 36.74% in first nine months (January to September, 2007)
compared to the corresponding period of 2006. Further, the scheduled
domestic air services are now available to/from 82 airports as
against nearly 75 in the year 2006,” states a ministry note.
The ministry expects this growth
to
continue – by at least 15% compounded year-on-year for the next two
decades. “Consequently, the number of passengers is expected to be
about 180 million by 2020 (against 60 million today). Airports will
handle 400 million people by 2020 (against 100 million today). Aircraft
with scheduled commercial airlines will increase from about
320 to 1000 by 2020. Investment expected from all sources in the next
10 years or so is $120 billion (approx. $80 billion on aircraft
acquisition, $30-35 billion on airports and 1$ 5-10 billion on other
aviation related items),” explains a senior ministry official.
But industry watchers see storm
clouds
ahead. They believe that the ministry's policies could see more
turmoil in respect of smaller airports.
Consider the following: India
today
has around 127 airports – small and large. All these come under the
purview of the Airports Authority of India (AAI). Most of these
airports do not generate any income. AAI has thus to subsidise their
operations and maintenance from the surpluses it earns from just 10
airports. But Bangalore and Hyderabad were given away to private
players, without calling for any bids. AAI gets just 5% of the share
of the revenues from these two airports, leaving it with surpluses
from just 8 airports to meet the costs of maintaining loss-making
airports. The ministry claims that a 5% share was found acceptable
because they were greenfield airports. Not everyone is satisfied with
this explanation.
In fact, AAI would have lost even
more
business had Mumbai and Delhi airports too gone the Bangalore and
Hyderabad way. However, thanks to a stiff resistance put up by the
AAI, and the unions and some parliamentarians, the aviation ministry
was compelled to invite open bids for both Mumbai and Delhi, on
account of which AAI is now slated to get 36% of revenues from the
operations at Mumbai's airport and 43% from Delhi.
Take another instance. The
ministry,
in an attempt to promote aviation, scrapped all airport charges for
aircraft having a seating capacity of 80 or less. This is likely to
further eat into the revenues that AAI could make, as almost all
regional airports normally cater to smaller aircraft. The ministry
has instead allowed it to earn revenues from the city office spaces
in all these cities on a public-private-partnership basis. Whether
the funds from such operations are adequate for for the AAI to
upgrade these airports remains to be seen. Some people see this as
yet another ploy for justifying even more airports to be handed over
to the private sector.
That would not be a problem, had
AAI
been allowed to compete with the private sector on an even footing.
Unfortunately, the ministry does not permit the AAI to compete with
other private players in developing airports, either in India or even
overseas. Nor does it allow the AAI to enter into collaboration with
private consultancy or engineering companies to win contracts in
India or overseas. This is a handicap no other Indian PSU has had to
suffer.
That explains why AAI has been
pushing
its case for being regarded as a mini-ratna (a small jewel) as
it has been a profit making body all along. This proposal has been
supported by the prime minister's office and has been recommended by
the Planning Commission. A mini-ratna status would allow AAI
to take up projects where the cost exceeds Rs.30 crore (but under
Rs.500 crore) without seeking approval from the ministry. It could
then appoint independent directors and external consultants as well.
To buttress its case, the AAI
points to
the work it has done on modernising the airports at Calcutta and
Chennai. In fact, Chennai airport today enjoys the best service
rating from international agencies compared to any other airport in
the country. Hopefully, AAI's demand for being regarded as a
mini-ratna should get cleared within the next two months.
Another area that could prove to
be
vexatious for the aviation sector is the ministry's unwillingness to
insist on royalties from privately funded airports. According to a
ministry source, “Revenue share is [there] only when government
assets are involved as in brown field airports like Mumbai &
Delhi. If the greenfield private airport is a state-owned one then
revenue share is for the state to decide with the JV company.” But
doesn't the telecommunications ministry have a policy on a Universal
Service Obligation (USO) fee to create a fund to develop backward
areas? Isn't airspace a national asset for which usage rights can be
charged to create a fund to finance smaller airports?
Nor has the ministry formulated a
clear
policy as yet for the setting up of new airports. The policy it had
of not allowing an airport within a 150 km radius of an existing one
is likely to be cast aside thanks to Mayawati's demand that Noida (70
km from Deli) be allowed to have an airport as well. And with no
clear policy to allow new airports, like the one at Mundra, the
aviation ministry may have to contend with more questions than it has
answers for.
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