Airport privatisation: FinMin flags oligopoly in aviation sector

Beneath the brand new ‘bundling’ mannequin, the federal government has paired main revenue-generating airports with smaller, loss-making ones into single bundles so that non-public concessionaires can cross-subsidise the working and capital bills of smaller airports utilizing income from high-traffic hubs.

This cover is geared toward limiting market focus and over-leveraging, or taking over extreme debt, which the federal government fears might create issues throughout a number of airport tasks, the Civil Aviation Ministry informed the Ministry of Finance on the 149th assembly of the Public Non-public Partnership Appraisal Committee (PPPAC) on August 4.

PPPAC appraises central authorities’s public personal partnership tasks above ₹250 crore earlier than it’s accredited by ministers or the cupboard relying on the scale of the challenge.

In February 2019, the Centre privatised six main airports: Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati. After a aggressive bidding course of, the Adani Group gained the rights to run all of them for 50 years.

In September 2020, Opposition MPs, together with Congress chief Ok C Venugopal, raised allegations over the award of a number of airports to a single personal group and questioned the federal government’s strategy to airport privatisation. The Adani Group took over the six airports between October 2020 and November 2021.

India’s airport market is concentrated amongst a couple of operators. State-run Airports Authority of India (AAI) manages 129 airports, whereas Adani Airport Holdings (AAHL), the nation’s largest personal airport operator by community dimension, operates eight airports accounting for about 24-25 per cent of passenger visitors and 33 per cent of air cargo.

GMR Airports, which operates Delhi and Hyderabad airports amongst others, has about 27.5 per cent of passenger visitors, in keeping with the corporate.

Collectively, personal operators Adani and GMR account for greater than half of India’s air passengers.

The airline market is equally concentrated, with IndiGo and Tata Group-owned Air India Group collectively accounting for about 91 per cent of home passengers in July 2026.

The MoF, the MoCA, the Adani Group, IndiGo and Air India didn’t instantly reply to emailed queries from the Enterprise Normal.

Amritsar-Kangra (Amritsar with Kangra in a single bundle), Varanasi-Gaya-Kushinagar, Bhubaneswar-Hubballi, Raipur-Aurangabad and Tiruchirappalli-Tirupati — with every bundle to be awarded to a single concessionaire.

The bidding course of may have one-stage short-listing, with the per-passenger payment for home passenger throughput because the bidding parameter.

The PPPAC granted in-principle approval to privatisation of 5 airport bundles on the assembly, the report said.

Through the August 4 assembly, a prime finance ministry official requested: “Given the oligopolistic nature of the aviation sector, what measures have been envisaged to make sure that the dangers associated to focus and over-leveraging are minimised, contemplating these dangers can have a cascading impact throughout all of the tasks?,” confirmed the report.

MoCA responded: “The variety of airport bundles which may be awarded to a single bidder can be capped to mitigate the dangers arising from market focus and potential over-leveraging, together with their doable cascading influence throughout tasks. The modalities of such capping are being finalised and can be submitted as a part of the proposal looking for closing advice by the PPPAC.”

The report didn’t specify the variety of bundles {that a} single bidder will finally be allowed to win.

Through the assembly, one other finance ministry official urged that solely tasks associated to the aviation sector ought to depend when assessing the technical expertise of bidders, the report confirmed.

The MoCA, nevertheless, proposed permitting bidders with related expertise throughout totally different infrastructure sectors. It stated bidders wouldn’t must have aviation-sector expertise particularly.

Their expertise might come from any infrastructure sub-sector listed in a harmonised grasp checklist of infrastructure, a authorities checklist that defines which sectors and tasks are formally categorized as infrastructure.

This was in step with a choice taken on the eighty fifth assembly of the Public-Non-public Partnership Appraisal Committee (PPPAC), the MoCA added.

The eighty fifth assembly of the PPPAC had taken place on December 11, 2018, a few months earlier than the six airports — Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati — had been privatised.

The report of debate of the August 4 assembly additionally confirmed after the February 2019 privatisation, the Airports Authority of India (AAI) developed the present bundling proposal to leverage the geographic and operational synergies between bigger and smaller airports and enhance the monetary viability of the bundles.

The federal government now plans to hunt market suggestions earlier than finalising the transaction construction. The MoCA informed the PPPAC that, after receiving in-principle approval, it will conduct a contemporary market-sounding train, that means it will strategy infrastructure gamers to evaluate their curiosity and acquire suggestions.

The ministry stated this bundling association is being proposed for the primary time within the airport sector and that suggestions from personal gamers might be integrated earlier than the proposal is submitted for the PPPAC’s closing advice.

Non-public concessionaires can even be required to undertake obligatory improvement and capacity-expansion work.

MoCA stated the concessionaire would undertake capital expenditure sanctioned by AAI in addition to further expenditure anticipated through the first seven years for capability augmentation, topic to relevant visitors or capability thresholds and Airports Financial Regulatory Authority (AERA) norms.

The timing of such enlargement can be linked to those triggers relatively than mounted time-bound milestones, to keep away from untimely infrastructure creation if visitors stays under projections.

The proposal additionally offered for a one-year joint administration interval involving present AAI staff after the personal operator takes over. Thereafter, the concessionaire can be required to retain 60 per cent of AAI staff for as much as three years.