Home / Business / Money / Kelkar report seeks greater PPP push in airport development

Kelkar report seeks greater PPP push in airport development

Airport infrastructure development has been jinxed under the Modi government. When it came to power last year, there were plans to give out six airports to private parties for modernisation and development. All these are currently being run by state-owned Airports Authority of India (AAI), but need upgradations due to increased traffic and future growth projections.

After much back and forth, the list of airports where works will begin has been pruned to two from six. Here also, no tender has been floated for private parties to come forward and the government is now willing to instead award only operation and management of the two identified airports to a private developer.

Two major airports outside this process – Kolkata and Chennai – will be developed by AAI itself.

The proposed O&M process is now mired in a controversy since this is being done without a global tender. But now, a committee set up by the Finance Minister on private public partnership (PPP) model of infrastructure development under V kelkar has made a sharp recommendation about the need for PPP model to grow airport infrastructure. Convention models of growth – in this case relying on AAI for virtually all airport infrastructure development – are obviously not enough.

The volume of passenger traffic has almost trebled in the last ten years and independent reports predict a multiple increase in the coming decade or two with most metro airports fast crossing their existing capacities, and requiring new facilities.

Such growth numbers cannot be achieved with conventional procurement options and there is a need to selectively utilize PPP frameworks in airport development. There would be multiple opportunities for city-side land development with appropriate contract structures including revenue share mechanisms

In the report released today, Kelkar has said “the volume of passenger traffic has almost trebled in the last ten years and independent reports predict a multiple increase in the coming decade or two with most metro airports fast crossing their existing capacities, and requiring new facilities.”

“Such growth numbers cannot be achieved with conventional procurement options and there is a need to selectively utilize PPP frameworks in airport development. There would be multiple opportunities for city-side land development with appropriate contract structures including revenue share mechanisms,” the report added.

Kelkar has further suggested that to avoid regulatory uncertainties, concession agreements for airports may stipulate important commercial parameters such as return on equity, policy, treatment of land for non-airport activities, treatment of cargo, ground handling, and fuel facilities, so as to avoid misinterpretation by the regulator while fixing the aeronautical tariff.

Leave a Reply

Scroll To Top