Govt avoids concession route, Changi to manage Jaipur, Ahmedabad airports for a fee

New Delhi: Privatisation is a big no-no as far as airports are concerned under the Modi government. So after much back and forth, the government has found a novel way to develop airports without actually giving out concessions to private parties, as was done with showpiece airports of Delhi and Mumbai earlier.[caption id=“attachment_2138085” align=“alignleft” width=“380”] Representational image. Reuters[/caption] The governments of India and Singapore have signed an MoU for Singapore’s Changi Airport to come in and help Airports Authority of India operate and manage two airports - at Jaipur and Ahmedabad. Earlier, the AAI was keen to bring in private parties under the PPP mode but this plan was scrapped. This is the first instance of a government-to-government agreement to develop airports in India, without the AAI having to float a tender. During Prime Minister Modi’s recent visit to Singapore, the two governments signed a pact which will enable Changi Airport to get the O&M contract for a fee. An AAI official clarified that the arrangement does not provide for any revenue sharing between the two parties though an equity participation has not been ruled out. So soon enough, passengers at Ahmedabad and Jaipur airports can soon look forward to the same retail and F&B experience that passengers at Changi airport in Singapore enjoy at present. The agreement was signed on November 24 during the visit of Prime Minister Narendra Modi to the island city state and will see Changi manage the retail space inside the terminal building and car parking space. The official quoted above said the airside operations will remain with AAI at all times and Changi is expected to augment revenue within the airport terminals. A team from Changi is expected in India by the end of the year to do due diligence on the two airports and make an offer to AAI, which owns and manages Ahmedabad and Jaipur airports as of now. The entire process is expected to be completed by 1 April next year by when Changi should be in a position to start working at these airports, the official said. Both these airports are expected to witness a significant jump in traffic. According to AAI’s own estimates, by 2023-24 Ahmedabad will see 7.87 million passenger traffic against 5.05 million now while Jaipur will see 3.75 million passengers in 2023-24 against just about two million at present. In August this year, it had become clear that the government was scrapping earlier plans to invite private developers to pick up equity stakes in the two airport projects of Chennai and Kolkata. This, after months of back and forth over whether the plan to privatise some airports should move forward at all and which all airports should be included in this list. At that time, It was also decided try out an Operation and Maintenance contract model for Jaipur and Ahmedabad. So why did the government chicken out of PPP model for airport development? A senior ministry official had explained earlier: “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.” Speaking today, AAI chairman RK Srivastava said AAI expects to invest upwards of Rs 20,000 crore in upgradation of existing airports and in creating additional airport infrastructure for regional connectivity over the next seven years. “We will fund some of this requirement through internal accruals and the remaining by raising debt,” he said without elaborating. Not just the privatisation of airports, the NDA government has also scrapped an earlier plan to corporatise and eventually list AAI on the bourses. This comes amid a growing chorus about letting AAI remain a state-owned entity so that it can “perform its sovereign functions well”.