Private sector will come in when they see a return, says Hardeep Puri

Topics private sector

References have been made to UDAN. UDAN is a demand-driven scheme. The government is very proud. Under Modiji’s leadership, we have operationalised 174 UDAN routes. And UDAN becomes operational because the state government, the Central government and all other agencies put something on the table. 

But how will the state government and the Central government put something on the table if you don’t have a system of cross-subsidisation provided by private-public partnership? So, we have a situation where some of my members would want us to go on financing loss-making entities, and at the same time, providing resources for connecting unserved and underserved airports. If we were in an ideal situation in which there is no limitation or scarcity of resources, something which is utopia, I think, it would be doable. But in a country where you have to provide for every development scheme, you ask yourself the question, “which part requires subsidisation and which part should be allowed to operate according to market forces?”

First of all, I would like to place the facts squarely before you. After the amendment, 16 airports will still be under the jurisdiction of Airports Economic Regulatory Authority of India (AERA). Tariff fixation, etc of airports, which will not be major airports, will not be privatised straightaway. So, there is a fundamental misunderstanding that if there is something going out of AERA, it immediately gets privatised. Not at all. These are separate processes. AERA has one Chairman, two members and a few limited staff will be allowed, after the 16 airports have been taken out of AERA, to concentrate on the ones where they need to, where the passenger throughput is 3.5 million passengers per annum. 

All the other airports that would not be major airports will continue to be looked after, for these purposes, by the Ministry of Civil Aviation and the government of India and it will not be private operators who will decide. It will be the Ministry of Civil Aviation that will decide.

Now, insofar as privatisation of airports is concerned, I want to submit the experience we have had. Earlier, we were inviting bids for privatisation where the bidding was confined to those who had previous experience. So, what happened in a few cases, I think in eight or nine, you had the same two bidders coming up repeatedly. When you remove that limit, today for the last six airports, three of which we are going ahead with, you found that the number of bidders has increased substantially, and in the last six bids, in respect of the persons who will be operating the airports, the final decisions have not been taken even though some business entities were named, — in three we have decided — they will pay upfront to the Airports Authority ~2,330 crore, if my memory serves me right, and it would be linked. 

This is a much more scientific way of bidding where the tariffs, the contribution of bid will be determined on the basis of the number of passengers, which does not lend itself to fudging. In the earlier system of gross revenue, you have a gross revenue figure and then you build in all kinds of other costs in that and that is what has led to some litigation. 

Mahesh Poddar mentioned that the pre-determined tax is indexed to the cost of CPI and WPI and so the problem of inflation would be addressed through that process. First of all, there is a fundamental point that needs to be submitted. Airlines are already in the private sector, with the exception of Air India. Jet Airways, which was a profitable entity up to a point of time, made a lot of money and then it suddenly started losing. It produces its own business plan. My good friend and distinguished member Sanjay Singh said that Jet Airways ceased its operations, several members of its staff committed suicide, what has the government done. 

Any business operation run in the private sector produces its own business plans. We are sensitive to failure. We are willing to see what can be done within the governmental system to cushion that failure. But, to suggest that a private sector entity goes belly-up and the government has to take the responsibility, I don’t think that is correct. 

What we are doing and that is what I want to place on record. Sir, we are in touch with all the other private airline operators — SpiceJet, IndiGo, etc, — and we are suggesting to them that the surplus staff of the erstwhile Jet Airways, in case Jet Airways is not revived after the NCLT process, be taken on board. I am happy to report hundreds of employees have been taken on the rolls of other operating airlines. We are also producing a website that is ready. I wish I had the capacity of telling you the website is up, every employee would be listed there and the prospects for their re-employment or employment in other entities will be facilitated by the government. 

Having said that, I want to reiterate, the government cannot assume the responsibility for a business failure conducted by a private party. I come back to the related issues. When we are talking in terms of — this is in reference to Amar Patnaik; — differential structure for different airports after passing of this Bill and how conflict of interest would be addressed. 

The Ministry of Civil Aviation determines tariffs of all non-major airports, AAI and private airports. So, there is no conflict of interest. The AERA will now deal with only those airports which have the passenger capacity of 3.5 million per annum. The rest will be determined by the AAI, and if we feel there is need for private capital to come into some of the larger airports. The private sector will come in for investing only where they see a return. But, that is where we have to step in. We have to ensure that the bidding is done in a manner that the beneficiary is the Indian citizen. The state gets resources that can then be utilised for cross subsidisation to the UDAN Scheme where it is the question of connectivity and connecting 100 un-served and under-served airports, helipads and waterports. 

Edited excerpts from the reply by Minister of State, Civil Aviation, Hardeep Puri to the bill for amendments to the Airports Economic Regulatory Authority of India Act, 2008, in the Rajya Sabha, July 16

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