Reality check on airports

New Delhi, July 16: A leading aviation think-tank has welcomed the budget proposals to build more airports, while listing the pitfalls that can derail the exercise.

According to Capa-Centre for Aviation, the budget sees the civil aviation sector as a major growth driver.

However, there were important issues to be addressed such as the impact of high charges on airlines and passengers.

Uncertainty about the economic regulatory framework as well as the broader operating challenges has also made investors wary.

In this year’s budget, finance minister Arun Jaitley announced that new airports will be developed in smaller cities and towns.

The Airport Authority of India (AAI) will build the airports through PPPs (public-private-partnerships).

The industry body said there was a need for the government to look into increased charges at PPP airports such as the Delhi International Airport.

“On some domestic sectors, around 17 per cent of the average gross fare now consists of taxes and fees, of which 10-12 per cent are related to airport charges,” it said.

Besides, lessons from the PPP experience have to be factored into future projects to prevent such challenges from recurring, Capa said.

“AAI was planning to award PPP concessions at an additional six airports. The challenge is to ensure that the privatisation process learns from past experience. In Sep-2013 the AAI announced plans to award PPP concessions at six airports — Chennai, Calcutta, Ahmedabad, Guwahati, Jaipur and Lucknow — with a further nine airports to follow.

“However the tender process has been stalled for several months due to a lack of preparedness with respect to the concession agreement and the revenue sharing and tariff structure framework,” it said.

Besides, the development of airports needs to be done judiciously as the AAI currently has 50 idle airports and a further 60 loss-making operational airports in its fold.