Wednesday, November 27, 2013

Airport privatisation: another scam in the making?

Shesh Narain Singh
The government of India has decided to hand over some airports built from public funds to the corporate sector. The government is going ahead with the plan although the department related Parliamentary Standing Committee on Transport, Tourism and Culture has put certain objections and they have been assured that the government will not do so.
A very senior officer in the Government of India informs that despite having given a solemn assurance to the parliamentary committee, the Ministry of Civil Aviation is going ahead and is in the process of inviting tenders to hand over the airports. For this purpose the government had set up a task force under the planning commission and three inter ministerial groups. These committees had recommended the development and operation of several metro, non-metro, greenfield and non-operational airports by private persons as the AAI finances are limited and there is need to tap revenue potential from ‘non-aeronautical services’ which Airports Authority of India will not be able to do due to its own constraints.
Sitaram Yechury is the chairman of the Standing Committee and all the important political parties including Congress and the BJP are represented on it. In its report, the committee does not agree with the government and has taken strong objection to the government’s decision. It has asked the government to take appropriate action to ensure that the loot of public funds is stopped herewith. The committee has cautioned the government to ensure that the Airports Authority of India ( AAI ) is not made a scapegoat and is allowed to function to perform its duty for the public good and is not compelled to work for the benefit of any private organization. The committee was unanimous in this.
The recommendations are direct and have put the government in a spot. The Committee does not agree with the Task Force and the Ministry that AAI will not be able to harness the potential for ‘non-aeronautical revenues’ from car parking, cargo facilities, hotels, passenger amenities, shopping etc. “due to its inherent constraints”. The report says that the Committee was neither informed specifically about those constraints, nor about the efforts made by the Government to enable AAI to overcome them. The Government has invested several thousand crores in modernizing these airports and now it is proposed to hand them over to private corporations. The Committee has recommend that instead of privatizing services at these airports, their management should be retained by AAI and a subsidiary of AAI or a Special Purpose Vehicle (SPV) can be formed for managing these airports. At the first instance AAI be allowed to operate the airports at Chennai and Kolkata and other non-metro airports for a few years.
The Committee was dismayed that instead of strengthening the AAI by giving it much needed financial and administrative autonomy to enable it to take its own decisions without being influenced by either the Ministry or the Planning Commission, a decision was taken to give the countries airports on platter to private parties. The report of the Committee says there is no logic behind privatizing all these airports after spending tax payers’ money for modernizing these airports. Public utilities created using public funds cannot be given to private parties for commercial considerations.
Officers of the Civil Aviation ministry submitted during the hearings that commercial space in the terminal buildings of both Chennai and Kolkata airports could not be utilized to generate revenue from the available huge space in terminal buildings. Entire blame for this has been laid on the Airports Authority of India and the Ministry had nothing to show for the efforts made by it to help AAI achieve this target. The Committee has noted the argument that large number of sub-optimal service contracts being awarded by AAI could also be eliminated if the operation and maintenance of the entire airport is granted to a single PPP concessionaire. The Committee does not agree with the government that AAI itself cannot be allowed to adopt a ‘single-agency model’ which the Ministry/Planning Commission is visualizing under the PPP mode.
The Committee is of the view that construction, operation and maintenance of airports should remain with Airports Authority of India. It should be empowered to take decisions to generate resources rather than handing over the core activities of the airports newly constructed with public money to the private players. The Committee has expressed its surprise on the unusual haste being shown in the process of privatization right from the constitution of Task Force, constitution of three Inter-Ministerial Groups (IMGs) one after another, placing the matter before Cabinet and obtaining its clearance, process of pre-bidding, etc.
The Standing Committee has recommended that AAI may be permitted to manage and operate all its airports, including the loss-making ones, with a rider that there should be time bound delivery of world class passenger services in a more efficient and transparent manner, matching with those being rendered by private airport operators.
The standing committee of the parliament is a powerful body but their recommendations are not binding. They have power only to recommend. When the committee system was introduced for the functioning of parliament it was assumed that the deliberations in the committee shall be deemed as good as the deliberations in the main chamber of the parliament but over the many years the shine of the standing committee is not the same as it used to be . The chairman of the committee Sitaram Yechury has expressed the hope that after his report the government will take appropriate action in the public and national interest.

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