Talking to ET Now, Vinayak Chatterjee, Chairman, Feedback Infra, questions whether the Airport Authority is a facilitator of PPP or a participant bidding for airports?
The aviation sector in India is growing at a very impressive and a solid run rate of 20% plus which means in every two and a half or three years or less than three years, the sector is actually doubling but the challenge could be the underlying infrastructure management, availability of land and also availability of capital. We always tend to talk about road building and construction but we never focus on the airport infra?
Yes, you have zeroed on the A category item for discussion. Much of the concern in the aviation sector is about airport infrastructure. Now that the government’s Udan Policy of getting people wearing hawai chappals (slippers) to fly in hawai jahaj (aero-planes) has gained traction, I have to complement the civil aviation ministry for giving this push for regional connectivity.
It adds further pressure any way to the normal growth of 20 to 23% and the very stressed airport infrastructure. Today the major hubs are Bombay and Delhi. Certain other tier one cities are crying out for attention. If I give you the macro picture, first there is a report by the centre for Asia Pacific Aviation (CAPA) who are one of the thought leaders in the sector and they say that in the next seven years, India requires $40 billion of investment to create fresh airport capacity. The visible pipeline now is a little short of $5 billion. We are way behind in terms of both strategic plans as well as the capex to reach that $40 billion. So, it is a very serious issue.
I would just want to add another point. It appears from this year’s budget speech and last year’s budget that the government very clearly wants to follow an off-budget method financing through asset recycling which means you sell government-owned operating Brownfield assets and get capital released from such operating utilities which government need not operate like airport authority. They own the assets, they can sell it and they can recycle the capital back into fresh capacity.
So, the two issues facing the airport authority right now is what is the stand on an asset recycling strategy? Do we have a roadmap for an asset recycling strategy like Mr Gadkari is doing on toll operator transfer for roads? The first bids have come in happily beyond the expectation of NHAI at some Rs 9000 crore from Macquarie. Does airport authority have any asset recycling strategy and secondly this business of PPP in existing airports. Look at Jaipur, Lucknow, Ahmedabad, Kolkata, Chennai. Can we have a definitive situation as to what exactly the airport authority wants to do on this? Many PPP documents have been floated and revised and bids have been called and cancelled. There is a certain feeling in Indian industry about the investors that airport authority is not clear in its own mind how it wishes to proceed on PPP of existing and future airports.
The last point is that in some of the recent bids on airport privatisation, we are a little surprised to see airport authority itself is bidding. If I am not mistaken, it bid for a new airport which is today on the backburner but it did bid for a new airport in Andhra. It also put in a bid for a new airport at Goa, So, is the Airport Authority an authority that facilitates PPP or is it itself a participant bidding for airports? There is a fair amount of lack of clarity and confusion in these areas.
I am going to twist the question completely and rather than getting into the areas of concern, let us talk about pockets of opportunity. Infrastructure is getting built up. Whether it is in the right time or whether it could have been done better is a separate debate. But stock market investors always look for that big mega trend and creation of airport infrastructure will be that next big trend. How do you think investors can participate in this mega trend?
There are two ways an investor can participate in airport development. One is a full 100% investment in a fresh new airport like Navi Mumbai which is like Jewar in Greater Noida, or Mopa in Goa. When an airport is fully in a private space, obviously investors participate as they have already shown interest in doing it in Delhi. The other is investors can participate in the limited tenders which is about PPP in airports. There is confusion vis-à-vis these policies. I do not think there is need for so much confusion to clear these policy aspects. It has been hanging like this for the last three years. Why cannot somebody take a view on this matter and close it?
The airport authority will say it is the civil aviation ministry, the civil aviation ministry will say it is an airport authority issue but this is just passing the buck. Three-four years have just gone by without any convergence on the matter and bid and rebid and fresh review and fresh terms and fresh thinking. In a sense, the investors are showing signs of lack of belief in the clear policy of existing airports. We cannot run away from that fact.
But on the beneficiaries point right now, what is the opportunity for infrastructure players other than of course, Airports Authority of India, which like you rightly mentioned is also bidding right now because up until now, you are mainly seeing L&T bidding in airport constructions. Do you think there are other companies as well which could come under the gamut? Do you see more technology joint ventures? Also, what about aviation ancillaries? Gone are the days of metal trunks and holdalls which were pretty prevalent during the train journeys. Now, it is about the VIPs, etc, of the world. Do you think these ancillary pockets also are bound to do well?
Before I answer this question, I want to contest one issue which chairman at airport authority raised and I hope he will respect my point of having a view point different from his. The task of authorities in infrastructure sectors is to create the right ambience. When you are putting in a bid for PPP, to create the right ambience and some kind of a Godfather, you can call it regulator, an enabling environment and architect to see that PPP’s work.
You cannot be a participant and regulator by yourself. You have to decide which side of the fence you are on. If NHAI puts up a bid, it is also an authority, National Highway Authority of India, airport is also an authority, inland water ways is also an authority. When these authorities craft bids and put them up for PPP, it is extremely difficult to understand the logic. I am going to leave this point aside to say this is a point I like to very seriously contest. How can you do this when you yourself crafting the deal and then bidding for it? It is just not on. Your role is to step back and create a governance and ambience framework.
On your second question of a lot of allied services, the answer is yes. Crowd handling, logistics paths, city-side real estate development, these are all the opportunities that airport development is throwing out but they should be clearly left in the domain of private sector to maximise these opportunities and there is a significant investor interest there.
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