Setback for airport privatisation, key agreements to be drafted afresh

Mihir Mishra Posted online: Saturday, Nov 09, 2013 at 0000 hrs
New Delhi : In a move that would further delay the privatisation of six airports in the country, the civil aviation ministry has decided to do away with the Planning Commission’s draft of the Model Concession Agreement (MCA) and prepare a new draft afresh.

The decision was taken at a meeting convened by civil aviation minister Ajit Singh and attended by officials from the aviation ministry and Airports Authority of India (AAI) here on Friday. “There were differences between the Planning Commission and the civil aviation ministry over the principles to be followed in the privatisation of airports. The MCA will now be redrafted by the Key Infrastructure Department (KID) of AAI and all stakeholders will be consulted for their views at a later stage,” a government official involved in the exercise said.

The MCA is being decided for the privatisation of Chennai, Kolkata, Jaipur, Lucknow, Guwahati, and Ahmedabad airports, which are running behind schedule. According to the timeline set by the Prime Minister’s Office, the concession agreement was to be finalised by October 15, 2013. Meanwhile, the civil aviation ministry has taken a final call on some clauses to be incorporated in the draft MCA.

“It has been decided that revenues from both city side (mainly includes revenues from hotels) and airport will form a part of the revenue — a part of it will be shared with the government,” said a aviation ministry official. The Planning Commission is of the view that revenues coming from hotels at the city side of the airport should not be shared with the government. It was also decided that the airport will be awarded only for 30 years first and any extension will be based on the review then. The Plan panel, however, was of the view that it should be awarded for a period of 60 years.

No decision, though, has been taken on method to be followed for fixing landing and parking charges at airports. The Planning Commission had proposed a model of fixing landing and parking charges prior to the award and linking its increase to the wholesale price index (WPI). The civil aviation ministry opposed to it on the grounds that linking it to WPI introduces an upward bias to the charges. The Plan panel’s mechanism of determining charges had been termed as “flawed” by the International Air Transport Association (IATA).

IATA, in a submission to the civil aviation ministry, had said that the MCA defeats the objective of public private partnership and is contrary to the Government of India’s established rules, which seek to ensure that concession agreements for natural monopolies like airports are not drawn in a way that the concessionaire enjoys “supernormal profits” at the expense of the public.