India aims to become the third largest aviation market by 2020 - and the largest by 2030. Government agencies have projected that around 500 airports in all, both brownfield and greenfield, would be required by 2020. The private sector is sought to be involved through different PPP models, with substantial involvement of state support in terms of financing, concessional land allotment and other incentives.
When CW focused on airports in its October 2014 issue, Airports Authority of India (AAI) had announced 50 low-cost airports on the PPP model and 15 greenfield airports that received approval. What happened subsequently?
¨Of the 50 low-cost airports announced, we signed an MoU for five airports with the state government and work has started,¨ responds S Sreekumar, General Manager -Planning, Airports Authority of India (AAI). ¨These include Hubli and Belgaum in Karnataka, Jarsuda in Odisha, Tezu in Arunachal and Kishangarh in Rajasthan.¨ As for the greenfield airports, the Karnataka Government is known to have started work on airports in Bijapur, Gulbarga, Hassan and Simoga. But as these were not financially viable, work stopped and contractors walked away. Now, the state government is trying to take up these projects through AAI, based on financial viability.
Most stakeholders seem to agree that land acquisition is not the real challenge here. What, then, is the problem?
According to Sreekumar, ¨In airport projects, cutting, felling and retaining the height of the earth is a huge challenge.¨ Depending on the region, problems could be related to land order, materials or environmental issues.
S Ramnath, CFO, ITD Cementation India, does not see execution as a major challenge. He reasons that AAI should be simply allowed to go ahead with its plans with no government interference. In his view, privatisation of smaller airports will not be workable for a private contractor as usage charges will not be as high as in cities like Mumbai and Delhi. Additionally, RS Ramasubramaniam, Co-Chairman, Feedback Infra Pvt Ltd, sees financing as a major issue. Thus, credible economics for banks to support closure will be required.
B Seenaiah, Managing Director, BSCPL Infrastructure, confirms that he does not have any work at present in this sector. ¨Unlike last year, we expect a number of airports to come up this year,¨ he says. Ramnath agrees, adding, ¨In the past three years, not a single airport project has been awarded. ¨The government announced plans to upgrade 23 airports but nothing has materialised,¨ he says, adding that the AAI and the government don´t see eye-to-eye. Thus, where the government is adamant on developing airport projects on the PPP model, AAI wants to execute the projects themselves.
For his part, Krishna Murthy, Senior Manager, Global Aviation, Louis Berger, is optimistic. ¨There were about seven to eight road blocks - environment and forest clearances, NoC from Ministry of Civil Aviation, and so on - in the Navi Mumbai International Airport, and as soon as the project came under the radar of the Narendra Modi Government recently, these have been cleared,¨ he confirms. Now the concessionaire has to come in and develop the project.
At present, AAI is working on the greenfield Pakyong Airport in Sikkim. The challenges are related to protest from the locals for other reasons, not acquisition of land. ¨In airport projects, we get the land from the state government,¨ says Sreekumar. He shares how the Shillong Government handed over land to start construction of the compound wall. Within three to four months, people protested on grounds of not receiving compensation. AAI has no control over such issues and the state government needed to sort it out. Finally, the contract closed and AAI stepped out. This is a typical situation where despite having the land, a project collapses.
When the government took over and announced it will go the PPP route for some Tier-II cities, there was a burst of energy. ¨Although I felt a little bit of go slow in between, I understand that they are ready to appoint consultants for the first batch of PPP for the Tier-II airports,¨ says Ramasubramaniam.
What´s more, as stated in IBEF´s recent report, Gujarat may get a second international airport at Dholera. The state government has formed Dholera International Airport Co Ltd and is obtaining approvals from the Union Government. Also, the government will award airports in Kolkata, Chennai, Jaipur and Ahmedabad on management contract. It has approved the construction of five budget airports to improve regional connectivity and work will start this year.
All considered, the airport sector is expected to start showing results in another six months.
AIRPORTS: CW´S RECOMMENDATIONS