Airport Privatisation: Developers seek changes in Policy
With the objective of privatisation of six airports in India, a meeting is planned between Indian and international airport developers with officials from the Planning Commission. Changes that need to be brought about in the business model for the airports under consideration as well as the qualification criteria required for getting awarded these projects are the primary issues that would be discussed. Earlier, some of the changes suggested by companies like GMR and GVK as well as some by the Confederation of Indian Industry (CII) were incorporated into the draft concession agreement revised by the government.
Govt proposes change in Policy:
According to the revised agreement, the government has not made it mandatory for companies bidding for airport development projects to have experience in a similar capacity nor form a consortium with a more experienced company to qualify for the project. On the contrary, the company that is required to qualify for the project just needs to have experience in any construction related industry, that includes sectors like power and telecom. However, this move by the government is reason enough for companies like GMR and GVK, which are renowned for airport development projects, to lose sleep over. These companies feel that this move by the government is likely to bring companies in the real estate and manufacturing sector into the fray, thereby diluting the process of selection of awarding contracts.
Instances of dilution in the selection process:
Such an instance can be cited in the case of the modernisation project of the Mumbai airport, in 2007. As per the pact signed for the project, GVK had to collaborate with Airports Company South Africa, which owns and operates 10 airports in South Africa, as well as a freight management company of South Africa called Bidvest. In bidding for the Bangalore International airport project, GVK had to again collaborate with Siemens Project Ventures GmbH and Swiss airport operator, Flughafen Zurich AG.
Selection of partners important:
To ensure that the quality, safety and operational efficiency of the project is taken care of, it is important that the partner in the project should have been experienced in the successful operation of an airport of the same passenger capacity as the airport that is proposed to be privatised. For airport projects that are awaiting privatisation like the ones in Chennai, Kolkata, Lucknow, Ahmedabad, Guwahati and Jodhpur, the concessionaire can meet the costs incurred by charging passenger fees.
Fixing tariffs:
The tariffs in this regard will be fixed by the Airport Economic Regulatory Authority, though companies associated with the project are apprehensive that there is no formula as such to fix rates. With the cost of privatisation of Chennai airport estimated at Rs. 1,200 crore and that of the Lucknow airport at Rs. 500 crore, it still lags behind when compared to the costs incurred in privatisation of the Delhi or Mumbai airports. However, the developers still feel that unless a formula is devised for calculating the tariffs, they will struggle to recover the costs incurred by them on the project.
