In-Principle Approval for Airports’ Privatisation

Why in News?

The Public Private Partnership Appraisal Committee (PPPAC) has granted in-principle approval to lease 11 Airports Authority of India (AAI) airports to private operators under the PPP model.

The airports have been grouped into five bundles for a proposed 50-year concession, with an estimated private investment of ₹8622 crore. 

Proposed Airport Bundles: 

The 11 airports have been grouped into five bundles:

• Amritsar-Kangra-Gaggal 
• Varanasi-Gaya-Kushinagar
• Bhubaneswar-Hubballi
• Raipur-Aurangabad
• Tiruchirappalli-Tirupati

Each bundle combines a relatively stronger airport with one or more smaller airports. This allows revenue from commercially viable airports to support investment and operations at less profitable ones.

What Does Privatisation Mean? 

The airports are not being permanently sold. Private concessionaires would operate, manage and develop them for the concession period, while ownership would remain with AAI.

• Air traffic control and communication, navigation and surveillance services will remain with AAI.
• Airport tariffs will continue to be regulated by the Airports Economic Regulatory Authority (AERA).
• Bids are expected to be evaluated primarily on the per-passenger fee offered to AAI.
• A one-year joint-management period involving AAI employees has been proposed, followed by retention of at least 60% of them for up to three years.

The proposal requires a final PPPAC recommendation before being placed before the Cabinet Committee on Economic Affairs (CCEA).

Why Privatise Airports?

• Mobilising capital: Reduces dependence on public funds for expansion and modernisation.
• Operational efficiency: Private operators may introduce better technology, management and passenger services.
• Revenue for AAI: Lease and passenger-linked payments can finance airports in remote and underserved regions.
• Regional connectivity: Bundling can improve the viability of smaller airports.
• Asset monetisation: Unlocks the value of existing public infrastructure without transferring ownership permanently.

Key Concerns: 

• Market concentration: Airport operations are already concentrated among a few private groups. In the 2019 round, the Adani Group won all six airports offered, after recommendations to cap awards at two airports per bidder were not accepted.
• Over-leveraging: Excessive borrowing by one operator could create risks across several airports.
• Higher user charges: Private operators may prioritise commercial returns, affecting passenger affordability. 
• Cross-subsidisation risk: Smaller airports may receive inadequate attention if traffic and revenue remain weak.
• Long concession period or lease reduces opportunities for competitive rebidding.
• Regulatory capacity: Effective AERA oversight is essential to prevent monopoly pricing and deterioration in service quality.

Safeguards Proposed: 

The Civil Aviation Ministry plans to cap the number of airport bundles that a single bidder can win. The exact limit is yet to be finalised.

Additional safeguards should include:

• Strict financial and technical qualification criteria
• Assessment of bidder debt and related-party exposure
• Measurable service-quality and capacity-expansion obligations
• Periodic performance reviews
• Protection of employees and passenger interests; and
• Strong competition and tariff regulation.

Airport PPPs can mobilise capital and improve services, but airports are strategic public utilities with natural-monopoly characteristics. The latest round should therefore combine private efficiency with competition, affordable tariffs, strong regulation and protection against excessive concentration.