Are private players going to invest in aviation if a profitable sector is clubbed with non-profitable ones?
The story so far: In the monsoon session, Parliament passed the Airports Economic Regulatory Authority of India (Amendment) Bill, 2021. The Bill, tabled in March this year and sent to a standing committee, seeks to broaden the category of airports for which the Airports Economic Regulatory Authority (AERA) of India can determine tariff by amending the definition of major airports.
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Why has the definition of a major airport been amended?
The AERA regulates tariffs and other charges for aeronautical services rendered at ‘major’ airports. Under the AERA Act, 2008, a major airport is one which “has, or is designated to have, annual passenger throughput in excess of three-and-a-half million or any other airport as the Central Government may, by notification, specify”. However, it does not provide for determination of tariff for a group of airports. The Amendment Bill has amended the definition of a major airport to include “a group of airports” after the words “any other airport”. The government hopes the move will encourage development of smaller airports and make bidding for airports with less passenger traffic attractive. It plans to club profitable airports with non-profitable ones and offer them as a package for development in public-private partnership mode to expand connectivity.
“Balancing the interests of the private sector and the government’s objective of privatising smaller airports will be a tightrope walk,” says Jagannarayan Padmanabhan, Practice leader and Director, Transport and Logistics, CRISIL Limited. “Whether the government succeeds will also depend on how the airports are packaged and if there are enough growth prospects, economic activity or tourist attractions near the non-profitable airports that will be clubbed.”
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