Private Airports for Regional Connectivity

The plan is to build 200 low-cost airports in the next two decades to connect Tier-II and Tier-III cities

With the intent of giving a fillip to the Indian civil aviation sector, the Modi Government has announced that it would develop airports in metros and non-metro cities through the public-private partnership (PPP) route to enhance air connectivity. The plan is to build 200 low-cost airports in the next two decades to connect Tier-II and Tier-III cities. Surely, this cannot be undertaken by the Airports Authority of India (AAI) alone, which already has its hands full with the responsibility to manage the large number of airports in its jurisdiction. In the recent past, the government has also revealed plans to construct 15 greenfield airports in areas identified as the most suitable to promote the low-cost model. In addition, as announced by the Minister of State for Civil Aviation, G.M Siddeshwara, the government has identified 50 locations with potential for small airports in various states, namely Andhra Pradesh, Arunachal Pradesh, Assam, Bihar, Chhattisgarh, Daman, Diu, Gujarat, Haryana, Jammu and Kashmir, Jharkhand, Karnataka, Madhya Pradesh, Maharashtra, Odisha, Punjab, Rajasthan, Tamil Nadu, Telangana and Uttar Pradesh.

The Minister also mentioned that some state governments have undertaken development of airports at their own expenses or through the PPP model. These are Maharashtra (Navi Mumbai), Karnataka (Bijapur, Gulbarga, Hassan and Shimoga), Kerala (Kannur), Uttar Pradesh (Kushinagar) and Goa (MOPA). The AAI provides technical assistance on the DPRs of such projects and undertakes pre-feasibility studies for site clearance of proposed sites.

Greenfield Airports

In recent years, the government has received initial proposals for setting up of greenfield airports at several places including Kotkasim (Alwar) in Rajasthan, Karwar in Karnataka, Annakara (Idduki) in Kerala, Androth (Karavati district) in Union Territory of Lakshadweep and Taj International Airport, Hirangaon in Uttar Pradesh. Necessary action for approval, project development including financing of the airport projects is undertaken by the respective airport promoters. The construction of airport projects depends upon many factors such as land acquisition, availability of mandatory clearances and financial closure by the individual operator.

Considering the phenomenal growth in the aviation sector and the interest shown by the various state governments for development of more airports, the Central Government has formulated a policy for approval of greenfield airports. As per this policy, the promoter, i.e. AAI, the state government or any other entity seeking to develop the airport, has to submit the proposal to the Central Government for consideration by a committee established for this purpose. Applications for setting up of greenfield airports are received from time to time, which are considered by the steering committee/competent authority for grant of ‘in-principle’ approval, after they have completed necessary formalities of obtaining the pre-feasibility study report, site clearance and clearances from the regulatory agencies.

Air Connectivity Policy

With strong winds of change blowing across the country, the Ministry of Civil Aviation has, accordingly, enunciated a policy to enhance air connectivity. In spite of the pains of the teething problems it is going through presently, regional aviation is going to thrive and dominate the aviation scenario in the years to come.

During the Twelfth Five Year Plan period, the government is planning an investment of $12.1 billion ( Rs. 72,600 crore) in the airports sector, of which $9.3 billion ( Rs. 55,800 crore) is expected to come from the private sector for construction of new airports, expansion and modernisation of existing airports and development of low-cost airports. Apart from the development of airports, the Ministry of Civil Aviation has directed every operator to provide a minimum of air transport services to designated remote and strategic areas as well as areas designated in the new regional aviation policy. The government has offered a number of incentives to operators flying on ‘non-trunk routes’ described as Category-II routes or those that are often financially unviable.

Concessions Galore

The Ministry of Civil Aviation has listed the airports for providing concessions to operators. These are Cuddapah (Andhra Pradesh), Akola, Gondia, Jalgaon, Nanded, Nashik and Sholapur (Maharashtra), Keshod, Bhavnagar, Rajkot and Porbandar (Gujarat), Cooch Behar and Hoogli (West Bengal), Kota (Rajasthan), Shimla, Dharamshala, Bhuntar/Kullu (Himachal Pradesh), Bilaspur (Chhattisgarh), Jabalpur (Madhya Pradesh), Deoghar (Jharkhand), Gaya (Bihar), Jharsuguda (Odisha), Tuticorin (Tamil Nadu), Ludhiana (Punjab), Mysore, Hubli and Belgaum (Karnataka), and Puducherry—all under the AAI.

The regional airports included are Sagar (Madhya Pradesh), Bareilly and Meerut (Uttar Pradesh), Karnal (Haryana), Diu and Jamshedpur (Jharkhand). The regional airports that are the civil enclaves in military airfields are Gwalior (Madhya Pradesh), Pathankot and Bhatinda (Punjab), Bikaner and Jaisalmer (Rajasthan), Jamnagar (Gujarat), Kanpur and Allahabad (Uttar Pradesh).

Also, the Ministry of Civil Aviation has announced concessions to any passenger or cargo aircraft which operate to the above airports for an initial period of three years. The concessions are exemption from landing and parking charges, Route Navigation Facility Charges (RNFC), Passenger Service Fee (PSF), fuel throughput charges and any other charges levied by AAI. The operators are also permitted to have their own ground handling arrangements. The Ministry of Civil Aviation has requested airports under the control of the Ministry of Defence to provide similar concessions. These concessions will be available to both scheduled and non-scheduled operators. Other aircraft operators will not be entitled to these concessions.

Participation by State Government

No airport development, small or big, can take off without active support of the respective State Governments. Hence the Ministry has asked them to provide adequate infrastructure to give a fillip to the aviation sector. The states are being asked to provide security and firefighting services, reduced VAT on fuel uplifted from within the state, infrastructure for proper access to airports, waiver of duty on electricity charges and waiver of municipal charges such as property tax/house tax for five years and underwriting of seats.

Air Connectivity Fund

In order to improve air connectivity in remote areas, the Ministry is planning to set up an air connectivity fund as a long-term measure to provide necessary financial support. The size of the fund, tenure and the institutionalised mechanism to administer the fund is to be separately notified by the government. For development of low-cost airports and to improve air connectivity to remote cities of the country, an Essential Air Services Fund (EASF) may be created with the help of Central Government, state governments and airport operators. Contribution to the fund can also be collected from passengers who are flying on Category-I and III routes. The fund so collected can be used for up to five years on routes that are commercially unviable to help them achieve a level of maturity.

The fund would be supported through budgetary allocation from the government on a year-to-year basis, besides the route-specific support from State Governments and the AAI. The AAI is proposed to earn and share revenues from privatisation of existing and future airport infrastructure as being undertaken by the Ministry for EASF. The Ministry is considering providing direct financial support to airlines operating in regional areas with EASF resources, while it has initiated talks with state governments to underwrite seats on new routes between smaller cities. The EASF has been created under the aegis of the Ministry of Civil Aviation to provide direct and indirect financial support to air transport service providers for operations on unviable routes. According to initial estimates, the fund would require an annual provision of Rs. 250-300 crore to support connectivity in 40 regional Tier-II and Tier-III cities identified for implementation of the policy in its first phase.

The policy has been long overdue but one must appreciate the fact that the Ministry had several rounds of discussions with various stakeholders. Consultancy firm KPMG had suggested that the government allow ‘no-frills’ airport model to lower the fixed cost of airport development and to improve the financial viability of Tier-II and Tier-III airports. Also, the Association of Private Airport Operators (APAO) has suggested that a Regional Scheduled Operator Permit (RSOP) be created as to help small airports and also operators.

There are concerted moves to develop airports across the country. Besides policy initiatives, the Central and state governments have to remove the bottlenecks impeding the growth of the aviation sector per se. Privatisation of smaller airports is one of the answers and no operator will be forthcoming unless there are some returns on investment albeit in the long term. The government has to assure that and there are indications too that the government of the day will support such moves.