AAI may halt privatisation plan of four airports including Kolkata, Chennai

Senior civil aviation ministry officials have confirmed to CNBC-TV18 that the entire process for giving out these four airports to private developers has been put on hold.

Sindhu Bhattacharya August 17, 2015 15:26:47 IST
AAI may halt privatisation plan of four airports including Kolkata, Chennai

New Delhi: The Airports Authority of India may have to shelve the ambitious plan to privatise four airports, for which bids had been called last year. The process to give out airports at Chennai, Kolkata, Jaipur and Ahmedabad to private parties for operation, management and development has been witnessing hiccups for months already as several deadlines for reaching the stage where bidders can come forward with their respective proposals have been breached.

Senior civil aviation ministry officials have confirmed to CNBC-TV18 that the entire process for giving out these four airports to private developers has been put on hold.

AAI may halt privatisation plan of four airports including Kolkata Chennai

Representational image. AFP

"Unlike other airports under AAI where private parties have been allowed, significant investment has already been made by the AAI in these four airports at about Rs 5,000 crore. Privatisation is usually done to attract investments but since significant money has already been invested in these projects, we have put the entire process on hold. Besides, there were some employee issues too," the officials said.

They said a final decision on whether to scrap the privatisation process entirely will be taken by the end of this month since 31 August is the deadline for bidders to submit RFQs.

Not just privatisation of these four airports, the NDA government may also put the corporatisation and eventual listing of AAI itself on hold. This, according to ministry sources, comes amid a growing chorus about letting AAI remain a state-owned entity so that it can "perform its sovereign functions well".

A senior functionary in the ministry had earlier confirmed that AAI's corporatisation plan will not figure in the upcoming civil aviation policy and that there has been a rethink on this entire listing process.

So why is the government having such frequent rethinks on airport modernisation? One of the most obvious reasons is severe criticism by AAI employees who have questioned the very rationale for giving out airports on PPP model after the state invested large sums of money. They have also been seeking status quo on their service conditions by asking for deployment under the new management on a deputation. In fact, the plan to develop AAI-owned airports by inviting private developers has been mired in delays right from the start.

The AAI first wanted to develop six airports, then pruned the list and now even this process is delayed. Earlier attempts by the authority to get private developers to run showcase airports have not been all successful as there were widespread criticism of Delhi and Mumbai airport privatisation leading to very high user tariffs. A fear of another round of steep hikes in user tariffs by private developers at these four airports may have also forced the government's hand.

Several airport developers had shown interest in bagging the contract to manage the two large airports of Kolkata and Chennai. These included Siemens Project Ventures, GVK Airport Holdings, GMR Airport Holdings, Celebi Aviation, Tata Realty and Infrastructure etc.

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