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Airport privatisation: Another scam in the making?

October 19, 2013 08:08 IST

The UPA government is trying to push through the second wave of airport privatisation before the elections and the controversial elements of this process threaten to harm the sector, according to G Ganapathy Subramaniam.

Even as the din over Abu Dhabi-Indian bilateral agreement that 'sweetened' the Jet Airways-Etihad deal is yet to die down, the United Progressive Alliance government has triggered yet another controversy in the civil aviation space by ushering in several disputable factors to hurry up privatisation of six airports.

The civil aviation ministry and the Planning Commission are trying to push through the second wave of airport privatisation in such a manner that favours companies that are already in the airport business rather than encouraging new players and competition.

This is being done by introducing extra weightage in the technical evaluation for companies with experience in the SAARC region. Should experience in an airport project in tiny Bhutan, Maldives, Nepal, Bangladesh or Sri Lanka matter in developing and running a Chennai or Kolkata airport?

Any company with exposure in Pakistan, of course, will face resistance from the intelligence establishment.

India is the largest country in the South Asian Association for Regional Cooperation (SAARC) region and the obvious beneficiaries would be the private sector airport operators we already have - GVK, GMR, Cochin International Airport Ltd and Reliance Airport Developers.

Of course, Cochin Airport Company is a Kerala government-driven venture that runs only one airport and Reliance runs only a clutch of small airports. Therefore, the big players to benefit from this rule are GVK and GMR.

The bid to put them at an advantage contradicts the move by the Civil Aviation Ministry and Planning Commission to curtail monopoly by saying that no bidder would be allowed to take more than two of the six airports - Chennai, Kolkata, Ahmedabad, Lucknow, Jaipur and Guwahati - that are on the block.

Even out of these six, a single player cannot win more than one out of Chennai, Kolkata and Ahmedabad.

This rule indicates that the Government does not want to give more than two airports to one player and does not want more than one big airport to go to a single company.

The movers and shakers behind the privatisation seem to have ignored the fact that  both GVK and GMR already have two large airports each.

Both GMR and GVK are among the potential bidders and the number of airports in their bag could increase to four each if this round of privatisation goes through in the manner in which it has been designed.

Mumbai and Bangalore airports are run by GVK while Delhi and Hyderabad are with GMR. All these are metro airports and Mumbai and Delhi are the top airports in the country.

While restrictions are being imposed on new players, there is no such bar on GVK and GMR. Rather, they are being put at an advantage with the SAARC criteria.

The other disputable attempt is to keep AAI totally out of the new companies that will run the six airports after privatisation. When the Delhi and Mumbai airports were privatised, Airport Authority of India was given a 26 per cent stake in the companies that were formed to take over management of these airports.

In the second innings of privatisation, the Manmohan Singh government proposes to allow private players 100 per cent equity in the new ventures. This means AAI will have no share in the profit that these companies generate.

Also, AAI (as a government representative) will have no place in the board of directors, leaving no opportunity to question partisan decisions by the management of such companies in day-to-day operations.

The government plans to introduce the 'Golden Share'  concept to give AAI the power to intervene, but this can happen only in the case of major issues and that too when they come to light.

Once the owner and operator of all civil airports across India, AAI has already lost 50 per cent of its business as it is been edged out of five top airports of the country, Delhi, Mumbai, Bangalore, Cohin and Hyderabad. The remaining big ones are on the block now.

Once these airports are privatised, AAI will have only Goa and Pune among the top 10 airports of the country. At the same time, it will be saddled by dozens of loss-making small airports across the country.

Apprehensions about their future have pushed AAI employees on the warpath. As potential bidders were taken to see the airports, protests broke out in Chennai, Kolkata and Lucknow.

Employees of other airports are also on warpath and Chennai AAI employees have brought the issue to the notice of the BJP and the Left.

The CPI has already condemned the privatisation bid and Subramanian Swamy of the BJP is looking into an appeal of the AAI employees to take the issue to court.

This clearly indicates that the UPA government has neither taken AAI employees nor political parties into confidence before plunging into the next round of airport privatisation.

More than anything else, it is the Government's hurry is handing over these airports to private bidders that is causing worry.

Even the potential bidders are surprised by the pace of the privatisation process and some initial deadlines have already been missed.

Why is the government in such a hurry? Is this hurry justified when assembly elections in five states have been notified and general election is just months away?

Even if the Manmohan Singh government manages to complete the selection process by the end of 2013, is it fair to hand over major assets of the country to private sector players in a questionable manner when Lok Sabha elections are just months away?

These are the issues causing concern among political leaders, trade unions and AAI employees; putting the intentions of the government in doubt.

CPI's D Raja and JD (U)'s Sharad Yadav (a former civil aviation) minister have written to the Prime Minister, but the government so far has not responded to their pleas.

As a result, airport strikes (of the type we saw when Delhi and Mumbai were privatised) and litigation over the privatisation are looming large.

While any airport strike will trouble the public, litigation and re-think at an advanced stage of bidding will only tarnish the credibility of economic liberalisation further.

Already the Bharatiya Janata Party is threatening to reverse some of the decisions of UPA (like FDI in retail) when it comes to power.

The current list of potential bidders includes Fraport,  Singapore Airlines, the Tata Group, IL&FS, Sahara and Essel are said to be among the bidders and any controversy derailing the process would drive away reputed players, both international and domestic, from the sector.

The net result will be lack of competition, leading to a situation of smaller private monopolies replacing what was once a large Government monopoly.

Disclaimer: The views expressed are the author's own.

G Ganapathy Subramaniam