Budget may announce metro airport upgrade

NEW DELHI: Having missed several deadlines on Prime Minister A B Vajpayee’s promise to upgrade the four metro airports to international standards, the government may announce a new formula in the forthcoming Budget to speed up airport privatisation. Likely to be part of finance minister Jaswant Singh’s Budget speech, the message would indicate clearly that the government would go ahead with the upgradation plan even if private investments are not immediately available. A special allocation for the ambitious plan is also likely, according to sources in the civil aviation ministry.
It is understood that the two-member panel of Mr Singh and civil aviation minister Shahnawaz Hussain –– named by the Union Cabinet to revise the airport privatisation plan proposed by the civil aviation ministry –– would finalise its work before the Budget. The Cabinet had given the panel a month’s time to come back with revised suggestions so that the four metro airports can be upgraded to international standards with private investment.
The Cabinet was not satisfied the proposal due to doubts over its ability to attract adequate investments as well as royalty for the Airport Authority of India (AAI) to cross-subsidise dozens of loss-making airports in various parts of the country. There were also doubts about prospective investors meeting the investment levels benchmarked by the AAI. The ultimate aim is to turn the four metro airports into hubs of international standard rather than emphasising on private investment, the sources said. Therefore, the current discussions veer around investments to the tune of more than Rs.1,000 crore by the government so that AAI could carry out the development. However, this would depend on the allocation that the finance ministry is willing to provide. The civil aviation ministry has indicated that AAI might be in a position to invest upto Rs.1,000 crore from its reserves.
The current discussions on the issue also involve the structure through which investments would be routed. AAI might either carry out the development directly or go in for special purpose vehicles (SPVs) which might be converted into joint venture later. The option of attracting private investments could be kept open by going in for the SPV route, the sources added.
The ambitious plan to attract private investments in the metro airports has been hanging fire for years due to procedural ambiguities. The government has even allowed 74% foreign investment in private airports but prospective investors feel the AAI Act should be amended first since it does not allow private parties to operate airports. The civil aviation ministry and KPMG –– advisor for the privatisation programme –– initially worked on a plan to amend the AAI Act but it was put on the backburner following adverse remarks from a standing committee of Parliament which looked into the proposed amendments.