India’s PPP: Airports

India has a total of 454 airports (including grass runways), of which 16 have international status. Of these, the Airports Authority of India (AAI) owns and operates 97. The AAI has stated it aims at upgrading all of these as well as adding new locations to better unify the country within the next 12 years. This requires infrastructure investment in terminals, runways and related construction to full operational and passenger capability at over 500 airports. The government has stated several times its intention to attract private investment into this sector, and many domestic and multinational players have been showing interest in the projected growth of India’s aviation sector. Much of this is within airport development and management. Some of these include India’s private airlines, among them Jet, Sahara, Kingfisher, Deccan, and Spicejet, who collectively account for about 60 percent of India’s domestic passenger traffic.

Some such as Kingfisher have now started international flights, while others will follow shortly once regulatory procedures are completed. India is now poised to meet international standards in the development and infrastructure of its airports as any recent traveler to Delhi, Mumbai or Chennai will testify. The government is planning modernization of the airports to establish a standard, while newly developed airports will help release pressure on the existing airports in the country.

The Delhi and Mumbai airports are in the process of being upgraded, while Bangalore and Hyderabad will also soon be upgraded to international airport. They are all earmarked for privatization once construction work is completed. Several regional airports are also set for significant upgrading to international standards, including Amritsar, Gutuahati, Ahmedabad, Goa, Chennai and Cochin.

According to the AAI, investment of US$8.5 billion has been planned for the development of Indian airports during the 11th Five Year Plan. The airports in Mumbai and Delhi have already been privatized and are now being upgraded at an estimated investment of US$4 billion.

The AAI plans to invest an additional US$3.07 billion over the next five years. From this, 43 percent will be for the three metro airports in Kolkata, Chennai and Trivandrum. The remainder will be invested in upgrading other non-metro airports and in the modernization of the existing aeronautical facilities, such as radar and related equipment upgrades. The following statistics and figures have been reported by the Ministry of Civil Aviation:

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• Passenger traffic is projected to grow at a CAGR of over 15% in the next five years; it is estimated that traffic will reach 100 million passengers per annum by 2010
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• Cargo traffic to grow at over 20% per annum; over the next five years, crossing 3.3 million tons by 2010
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• Major investments planned in new airports and up gradation of existing airports
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• 100% FDI is permissible for existing airports; FIPB approval required for FDI beyond 74%.
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• 100% FDI under automatic route is permissible for greenfield airports.
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• 49% FDI is permissible in domestic airlines under the automatic route, but not by foreign airline companies.
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• 100% equity ownership by non-resident Indians (NRIs) is permitted.
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• AAI Act amended to provide legal framework for airport privatization.
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• 100% tax exemption for airport projects for a period of 10 years
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The “open sky” policy of the government and rapid air traffic growth have resulted in the entry of several new privately owned airlines and increased frequency/flights for international airlines; foreign airlines currently have the lion’s share of passenger traffic into and out of India as the approvals procedures for obtaining a license to operate in India as a foreign airline is just two years, as opposed to five for Indian domestic carriers operating international routes

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