Email
Print
ShareThe aviation industry is flying, literally. As per a ministry note, the growth in domestic passenger air traffic in the first nine months of 2007 was an impressive 36.74% year-on-year.
What's more, scheduled domestic air services are available to and from 82 airports as against 75 the previous year.
The ministry expects this growth to continue, by at least 15% YoY for the next two decades.
A senior ministry official says, "The number of passengers is expected to be about 180 million by 2020 (against 60 million today). Airports will handle 400 million people by 2020 (against 100 million today).
Aircraft with scheduled commercial airlines will increase from about 320 to 1,000 by 2020. Investment expected from all sources in the next 10 years or so is $120 billion ($80 billion on aircraft acquisition, $30-35 billion on airports and $5-10 billion on other aviation related items)."
But, industry watchers see storm clouds ahead. They believe the ministry's policies could see more turmoil in respect of smaller airports.
India today has around 127 airports, small and big, which come under the purview of the Airports Authority of India (AAI). Most of these airports do not generate any income and the AAI has to subsidise their operations and maintenance from the surpluses it earns from just 10 airports.
Yet, Bangalore and Hyderabad were given away to private players, without calling for bids. The AAI gets just 5% of the share of the revenues from these two airports, leaving it with surpluses from just 8 airports to meet the costs of maintaining the loss-making airports.
The ministry claims that a 5% share was found acceptable because they were greenfield airports. Not everyone is satisfied with this explanation.
In fact, the AAI would have lost even more business had Mumbai and Delhi airports, too, gone the Bangalore and Hyderabad way.
However, thanks to a stiff resistance put up by it, and the unions and some parliamentarians, the aviation ministry was compelled to invite open bids for both airports, on account of which the AAI is now slated to get 36% of the revenues from operations at Mumbai and 43% of revenues at the Delhi airport.
Take another instance. The ministry, in an attempt to promote aviation, scrapped all airport charges for aircraft having a seating capacity of 80 or less.
This is likely to further eat into the revenues that the AAI could make, as almost all regional airports normally cater to smaller aircraft.
The ministry has instead allowed it to earn revenues from the city office spaces in all these cities on a public-private-partnership basis. Whether the funds from such operations are adequate for the AAI to upgrade these airports remains to be seen. Some people see this as yet another ploy for justifying even more airports to be handed over to the private sector.
That would not be a problem, had the AAI been allowed to compete with the private sector on an even footing. Unfortunately, the ministry does not permit the AAI to compete with other private players in developing airports, either in India or overseas.
Nor does it allow the AAI to enter into collaboration with private consultancy or engineering companies to win contracts in India or overseas. This is a handicap no other Indian PSU has had to suffer.
That explains why the AAI has been pushing its case for being regarded as a mini-ratna as it has been a profit making body all along. This proposal has been supported by the Prime Minister's Office and recommended by the Planning Commission.
A mini-ratna status would allow the AAI to take up projects where the cost exceeds Rs30 crore (but under Rs500 crore) without seeking approval from the ministry. It could then appoint independent directors and external consultants as well.
To buttress its case, the AAI points to the work it has done on modernising the airports at Kolkata and Chennai. In fact, Chennai airport today enjoys the best service rating from international agencies compared with any other airport in the country.
Hopefully, the AAI's demand for being regarded as a mini-ratna should get cleared within the next two months.
Another area that could prove vexatious for the aviation sector is the ministry's unwillingness to insist on royalties from privately funded airports.
According to a ministry source, "Revenue share is [there] only when government assets are involved as in brownfield airports like Mumbai and Delhi. If the greenfield private airport is a state-owned one, then revenue share is for the state to decide with the JV company."
But, doesn't the telecommunications ministry have a policy on a universal service obligation fee to create a fund to develop backward areas? Isn't airspace a national asset for which usage rights can be charged to create a fund to finance smaller airports?
Nor has the ministry formulated a clear policy as yet for the setting up of new airports. The policy it had of not allowing an airport within a 150 km radius of an existing one is likely to be cast aside thanks to Mayawati's demand that Noida (70 km from Delhi) be allowed to have an airport as well.
And with no clear policy to allow new airports, like the one at Mundra, the aviation ministry may have to contend with more questions than it has answers for.
