Explained: The Centre’s move to privatise airports and Tamil Nadu’s revenue share model

Chhattisgarh and Jharkhand have backed MK Stalin government's proposal which says that whenever the Centre privatises an airport, the state should get a share in the revenue

FP Explainers April 25, 2022 16:46:24 IST
Explained: The Centre’s move to privatise airports and Tamil Nadu’s revenue share model

The Centre planned to privatise 25 airports over the next five years under the National Monetization Pipeline. PTI

The battle between the Centre and states seems to only grow bigger and this time the struggle is over privatisation of airports and the revenue model in such a case.

After the Tamil Nadu administration, under MK Stalin, said that the state government should get a share in the revenue whenever the Central government privatises an airport, the states of Chhattisgarh and Jharkhand have also backed this proposal.

T S Singh Deo, Chhattisgarh’s minister of panchayat and rural development, health and family welfare and commercial tax said, “This is very logical. When you give it (land) to a Government of India enterprise, you are becoming a partner and that is your asset. When that asset is being transferred to another party, and especially when that party is a private party — only one partner cannot get the share.”

We take a look at what the Tamil Nadu government had demanded when it comes to privatisation of airports and the tiff between the states and the Centre over the matter.

Privatisation of airports

In December last year, Minister of State for Civil Aviation General VK Singh (retired) had said that the Centre planned to privatise 25 airports over the next five years under the National Monetization Pipeline (NMP).

As per NMP, 25 Airport Authority of India (AAI) airports had been earmarked for asset monetisation over the years 2022 to 2025 namely Bhubaneshwar, Varanasi, Amritsar, Trichy, Indore, Raipur, Calicut, Coimbatore, Nagpur, Patna, Madurai, Surat, Ranchi, Jodhpur, Chennai, Vijayawada, Vadodara, Bhopal, Tirupati, Hubli, Imphal, Agartala, Udaipur, Dehradun and Rajahmundry.

The MoS said the airports were selected as they met conditions for monetisation which stipulate annual traffic above 0.4 million passengers in FY 2019 and 2020 and a sizeable ongoing, proposed capes plan as per the National Infrastructure Pipeline (NIP).

What Tamil Nadu has to say?

The Dravida Munnetra Kazagham-led Tamil Nadu government earlier this month issued a policy note, saying the government should claim a proportionate value, or revenue, from the AAI if the Union Ministry of Civil Aviation decides to privatise airports in the state, pointing out that it originally gave land for free or at concessional rates for central public sector undertakings and projects of the Union government.

This was in reaction to the Centre's decision to privatise Trichy airport in Tamil Nadu.

Industries Minister Thangam Thennarasu presented the policy note to the state Assembly last Tuesday.

As per the policy note, the state government acquires and transfers land to the Centre-run AAI free of cost, and if the AAI or the Centre transfers that land to a third party, the value realised or revenue accrued thereby must be proportionately shared with the state government “reflecting the huge investment in land being made by the state government”.

The Tamil Nadu government, as per an Indian Express report, also used this same principle in December of 2021 when it objected to the sale of BSNL properties worth about Rs 1,250 crore in Chennai.

Incidentally, the policy note comes at a time when several airport projects are being developed in the southern state. For instance, the AAI has requested for 64.57 acre of patta land and alienation of 11.58 acres of poramboke land for Chennai Airport.

Jharkhand, Chhattisgarh support Tamil Nadu

Tamil Nadu’s stance with the Centre on the matter has found support in Jharkhand and Chhattisgarh. Both the states, ruled by non-BJP parties, said that the state administration should get a share in the revenue.

Chhattisgarh's T S Singh Deo said in a PTI report, “So long as it is in the government sector, things are moving in a particular way, the government of India would be making some revenue and there would be something spilling over to the state government and there would be benefit to the public, so that is fine.”

“Now when you are selling it to a third entity which is a private party, then you are selling the assets of the company, which include apart from the infrastructure, the land also. So, the state government should be given the value of the land,” he added.

Jharkhand’s finance minister Rameshwar Oraon told PTI, “I agree (with the Tamil Nadu government). Land belongs to the state.”

However, the Centre isn’t of the same view. A senior official, who closely works on the Centre’s privatisation plans, told the Indian Express, “One is the direct economic activity that benefits the entire state. Even within the region where the airport is being developed, there are catchment areas that reap benefits, which the state gets. The land value gets enhanced and it translates into better collections of stamp duties, etc.

“For private companies, if such demands result in an additional outgo being created in addition to what they share with the AAI, then it does affect the attractiveness of the project,” the official said.

With inputs from agencies

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