Sunday, May 22, 2022

This letter sent to PM decodes ‘misconception of profit in airport privatisation’

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New Delhi: In a letter written to Prime Minister Narendra Modi, employees of the Airports Authority of India have raised certain arguments, that challenge the idea of 'airports privatisation is good for the economy'. The letter aims at making a justified comparison of the state of revenue pre and post-privatisation of India's biggest airports, Delhi and Mumbai. The letter also throws light on how the land mafia takes advantage of the govt land earmarked for 'non-aviation purposes once privatisation comes into the picture. 

Pre and Post-privatisation scenario of Delhi, Mumbai, Hyderabad, and Bengaluru

The Union has written that an objective assessment was needed to know whether privatization was good or bad not only for the Airports Authority of India but also for the air passengers for whom the airports are and ultimately for the economy of the country. "The privatisation has not increased financial resources of the airports which went under the banner of privatisation (Delhi & Mumbai airports). Earlier when the airports were under AAI, the revenue yield was up to 40% of the total revenue/profit of AAI which has come down to 34% under privatisation". The union says it proves that the private operators are not experienced enough to run the airports in spite of the fact that they have been given full leverage and permitted to levy Airport Development Fee and Passenger Fee, which fetches handsome revenue to them. The main sufferer, in this case, is AAI, the passengers and finally the Government, who will not receive dividend tax as was being paid by AAI to the Government.
Apart from the above, there have been many instances in which the private parties have not paid many legal payments like interest on the security deposit. They have also indulged in forming JV companies of their group Co. and acquiring stakes in JVC's by getting quoting it low, even after having a conflict of interest, alleges the letter.

It is surprising to note that the Govt. including our Honourable Minister and Secretary are fully aware that both DIAL and MIAL now majority-owned by Adani, have stopped paying to AAI invoking the "force majeure "clause which is even against Attorney General's opinion, then why privatization and why profit-making airports of AAI are being forced into privatization.

Role of Land Mafia in privatisation

The union has said that the government is the biggest sufferer of the revenue loss as no revenue is shared with govt once the land earmarked for 'non-aviation' purpose is monetised by a private player. 

 "It is a known fact that major component of interest in the airport privatisation is the availability of huge area of land and the commercial value it lifts of the land in the close vicinity of the airport. Once the airport is privatised, the land mafia increases the prices of land in the surrounding areas and the private player, to whom the airport is handed over, indulges in the commercial exploitation of the land earmarked for non-aeronautical purposes. No revenue on this account is shared by a private entity against land monetization and the entire money goes to private players. Land monetization is the main source of interest in this game" alleges union. "At Delhi, huge land has been used for non-aeronautical purposes by establishing hotels. What AAI has gained out of it, nothing. Both GMR and GVK have been crying from the top of their houses that they are incurring huge losses by running the airport but at the same time they are not handing over the airport back to AAI. They have created a lot of subsidiaries and are minting money without paying anything to AAI", said the union.

Effect on revenue earnings of AAI

"All these profit-making Airports, which are being forced into privatization, are the main profit centres of AAI and will never make a loss. It, therefore, defies logic as to why such an assured business is being passed on to private players. All these Airports, being run by private airports, come under AERA regulations but even then, they do not spend a single penny from their pocket and the entire cost is being recovered from passengers by hiking tariff, GMR has not invested a single penny in Delhi. Rather the commercial exploitation of land earmarked for nonaeronautical purposes has brought
more revenue to GMR without sharing with AAI" alleges the letter.

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Had the airports been allowed to be with AAI, then AAI would have continued to look after existing 125 loss-making Airports as well. It is to be submitted here that AAI has 100 new RCS loss-making Airports coming up in India. What shall be the fate of AAI later, can well be imagined. So in a nutshell, it is a great loss of the Govt as well as the AAI and later the public at large.

Claims of Enhanced efficiency

Rejecting the claim of increased efficiency the union has said that "the point being spread about efficiency enhancement is also not true as all Airports being privatized already have Highest ASQ rating Airports as judged by Airports Council of ICAO (International Organisation), which was accorded to them due to professional maintenance of the services at these airports by AAI Officers and Staff. Therefore, no efficiency enhancement is involved in this exercise".

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"Private players are being given a huge area of AAI land for 50 years. After such a long period, these private entities will claim that these land banks belong to them and not Govt. as with the passage of time the entire set up of Officers will undergo a change. With the way the Government loses cases in the Court, it is certain that after 50 years no one would be able to contest the claims of private players" the letter concludes.

(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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