GoM on airports seeks A-G views on pvt funds

The empowered Group of Ministers on airports has asked Attorney General Milon Banerjee whether under the existing laws the Government can al...

The empowered Group of Ministers on airports has asked Attorney General Milon Banerjee whether under the existing laws the Government can allow Airport Authority of India (AAI) to lease land for commercial activity on the city side of the airport to attract private investment.

With private players placing orders for 160 aircraft worth $ 12 billion at the Paris Air Show, development of airport infrastructure in the country has acquired a new urgency.

The GoM on airports, which met on June 14, discussed the developing of infrastructure at Delhi and Mumbai airports. The meeting was, however, inconclusive with Law Minister H.R.Bharadwaj urging the high-powered group to seek Banerjee’s advice on private investment at the two airports.

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Delhi requires more than $ 2 billion as investment, out of which Rs 2,800 crore will have to be put in for developing the airport before the 2010 Commonwealth Games. Mumbai, on the other hand, requires a total investment of Rs 4,500 crore, out of which Rs 2000 crore needs to be put in within two years as the annual passenger traffic has grown by 24 per cent in the past two years.

While Banerjee’s advice is expected to come next week, the Ministry of Civil Aviation has told the ministers that the AAI Act, amended in 2003, allows for commercial leasing as long as it is in conformity with the objectives of the airport. This means building hotels, food courts and duty-free lounges. It also told Pranab Mukherjee, who heads the GoM, that even Solicitor General of India Goolam E Vahanvati has asked the Ministry to frame a policy on commercial leasing for developing infrastructure of the airports.

Though the civil aviation ministry informed the GoM that this could be done under the Airport Infrastructure Policy, 1997, Mukherjee — supported by Deputy Chairman, Planning Commission, Montek Ahluwalia — wanted to seek Banerjee’s view before the GoM cleared the Mumbai and Delhi project. The other key members of the GoM — Finance Minister P. Chidambaram and Commerce Minister Kamal Nath — indicated that they were all for commercial leasing.

Non-metro airports for modernisation

	The airports for which due diligence (feasibility report) has been completed: • Ahmedabad, Amritsar, Goa, Guwahati, Lucknow, Madurai, Jaipur, Mangalore, Thiruvanthapuram, Udaipur, Agatti (Lakshadweep), Aurangabad, Bhopal, Bhubaneshwar, Coimbatore, Indore, Khajuraho, Patna, Port Blair, Nagpur, Rajkot, Trichy, Vadodara, Varanasi, Visakhapatnam

The civil aviation ministry is pressing for an early decision on this since otherwise it would be difficult to attract private players for the non-metro airports (See Box 1). The other option for AAI is to float bonds in the market to attract capital for investing in airports. The AAI has already invested in Srinagar, Dibrugarh and Bhubaneshwar airports where it is difficult to find private investment.

According to the ministry’s plans, the non-aeronautical revenue (raised through commercial leasing) will be invested in the aeronautical area — that is upgradation of runways, navigational facilities and aerobridges. It has pointed out that this procedure is followed worldwide with Hong Kong and Dubai investing no less than US $ 8 billion and US $ 10 billion for development.

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Meanwhile, the GoM has struck down the proposal that the airport building should reflect the history and culture of the city. As this will come in the way of future expansion of the airport, the Government is in favour of functional modular glass and steel buildings that can be expanded if and when required.