Wednesday, August 10, 2022

Divestment: Govt to sell AAI stake in Delhi, Mumbai, Hyderabad & Bengaluru Airports

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New Delhi: The primary argument in favour of privatisation of airports used to be that the government earns more revenue from the minor stake in a privatised airport than from those that are fully-owned by the government. Now the days for this argument are seemingly over. Sources have confirmed that the govt is looking to sell the Airports Authority of India's (AAI) remaining stake in India's premium Delhi, Mumbai, Bengaluru, Hyderabad airports. Sources have confirmed that the Civil Aviation Ministry has identified 13 AAI airports to be monetised through the OMDA (Operation, Management, Development Agreement) model and a transaction advisor for the same purpose has been appointed.

Govt's reason behind the privatisation of airports

Sources close to the matter have confirmed that in order to monetise the airports through the OMDA model the package needs to look attractive. So the proposal for 13 airports will be a mix of profitable and non-profitable airports. This is the reason MoCA has initiated the process of obtaining requisite approvals for the divestment of equity stake of AAI in the joint ventures for the Delhi, Mumbai, Bengaluru and Hyderabad airports. Once approval is through, the government will sell the remaining shareholding of AAI in these four key airports.

What is the current status of AAI's stake?

Currently, AAI holds a 26 percent stake each in the Delhi and Mumbai airports, 13 percent in Hyderabad and 13 percent in the Bengaluru facility. The GMR Group owns a 54 percent stake in the Delhi airport, while Adani Group holds 74 percent in the Mumbai airport. In addition to these four airports, AAI holds a 49 percent stake in Nagpur, 7.47 percent in Kannur, and 51 percent in Chandigarh.

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Is 100% privatisation OK?

PSU Watch believes that the stake sell of the premium airports will certainly bring the monetisation target of Rs 20,000 crore close but it may have a devastating impact on the interests of air passengers, the morale of AAI and its employee base that is over 20,000 in number. The government's equity presence in form of AAI's stake is extremely crucial because it ensures the balance in terms of keeping user costs within reasonable limits. Once an airport will be fully-owned by a private company, govt is going to lose all its say and it will kill the crucial oversight. 

The government has set an ambitious target of raising around Rs 2.5 lakh crore through asset monetisation in 2021-22, comprising various asset classes across eight ministries.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)

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