Why Indian govt is privatising airports

Recently there has been much discussion and furore regarding the Indian Government’s decision to privatise many public and government-held entities, including airports. Over the next five years, the Government plans to privatise thirty to thirty-five airports. Whether you favour this decision or not, it is necessary to understand why the Government has taken this step.

What does airport privatisation mean?

Airport privatisation doesn’t mean that the Government is selling the airports to private players. Instead, private firms will be provided a lease of the airport for a specific period. The firms will be responsible for maintaining and managing the airports, carrying out various aviation operations, and ensuring they are running efficiently.

The privatisation is based on a public-private partnership (PPP) model rather than having private players owning the airports with total authority, as it is generally perceived. The Airports Authority of India (AAI) will continue to hold a stake in these airports. The airports and the aviation sector, in general, are expected to see a boom in business with the privatisation move.

Why is the government privatising airports?

The main benefit of privatising airports is the boost to infrastructure development in the country. Since the private bodies will be managing and maintaining the airports, it could lead to high-class service with international-level infrastructure. The added benefits of airport privatisation include:

  • Increased efficiency

Private firms are more efficient than their government counterparts. They are the risk-takers and introduce new methods that can help make operations more efficient, for example, automation. Automating various processes can help complete tasks quicker, resulting in reduced operating costs and increased efficiency.

  • Reduced burden on taxpayers

The Government has proposed a ‘per-passenger fee’ model. The airport owning firm is allowed to charge a separate user fee from the passengers. This fee will fuel the company’s profits and can be used for various other purposes like airport infrastructure development. This reduces the Government’s dependence on the taxpayer’s money to be used to manage the airports.

  • Periodic upgrades

Technology keeps changing every few years or so. There are significant costs involved in upgrading to the latest technologies. Similarly, the construction and management of airport infrastructure are capital-intensive. Given the country’s massive size, the Government can’t afford to upgrade all the airports simultaneously. However, leasing out the airports to private players can negate the issues as the airport owners will carry out the upgrades.

Privatising airports is not a new concept. India already has five privatised airports, including the Mumbai and Delhi airports, which were privatised back in 2006. Similarly, in addition to these two airports, the Bengaluru, Hyderabad, and Cochin airports are running on a PPP model. Similarly, hundreds of privatised airports are proving beneficial to the owners, Government, and the public alike.

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