Developments of Airports in India through Joint Ventures under Public-Private Partnership(PPP) model

• The civil aviation industry in India has emerged as one of the fastest growing industries in the country during the last three years. India is currently considered the third largest domestic civil aviation market in the world.
• Public-Private Partnerships (PPPs) have emerged as an innovative way to pool the resources of governments and private companies in order to achieve these development goals.

Why did India go for PPP model?

Inadequate infrastructure capacity to meet growing demand at the time :-

1. In the early 90’s the government and Airport Authority of India (AAI) had invested substantial resources in the development of airport and navigation services infrastructure. However, this was a significant strain on Government finances, more so as the aviation sector had not taken off.
2. This gap in supply-demand necessitated the influx of private capital to build capacity and drive traffic.

Using Private Capital to supplement Public Investment

1. Under the tenets of the Chicago Convention, ownership and management of airports and air navigation services may be delegated to the private sector. Using this the Government of India embarked upon a massive privatisation exercise.

Positives:-

• Recourse to the Public Private Partnership (PPP) model has boosted private sector investments in airports
• PPP route for five international airports (Delhi, Mumbai, Cochin, Hyderabad, Bengaluru) most noteworthy
• In Union Budget 2017, Government of India has decided to develop select airports in tier 2 cities under PPP model in order to attract investments from private players.
• Presently India has 5 PPP airports each at Mumbai, Delhi, Cochin, Hyderabad and Bengaluru, which together handle over 55 per cent of country’s air traffic.

Challenges faced by the authorities:-

Increased charges at PPP airports have certainly been a contentious issue for airlines.

A clear process has not been established for determining the appropriate level of capital expenditure in airports and for monitoring project costs to prevent the massive budget over-runs that have occurred in some cases and which have simply been recouped through higher charges that are borne by the airlines and passengers.

AAI and infrastructure plan

• The new policy is also silent on the need for complete transformation of the Airports Authority of India (AAI).
• Experts opine that AAI focuses heavily on capital expenses. Moreover, without a clear infrastructure plan, the expected job creation is not likely to happen.
• Employees of AAI fear losing their jobs when private developers take over.

Way forward:-

1. The industry stakeholders should engage and collaborate with policy makers to implement efficient and rational decisions that would boost India’s civil aviation industry. With the right policies and relentless focus on quality, cost and passenger interest, India would be well placed to achieve its vision of becoming the third-largest aviation market by 2026.
2. In order to provide a big push to the country’s civil aviation sector, the Budget 2018 announced the NABH Nirman initiative. This new scheme aims to increase the number of Airports and their capacity to handle traffic. Such schemes need to be implemented.
    

By: ABHISHEK KUMAR GARG