India’s Airport Monetisation Push: Promise, Pitfalls and Policy Choices

Why in News ?

The Union government has advanced the third round of airport privatisation, proposing to lease 11 Airports Authority of India (AAI) airports to private operators under the Public–Private Partnership (PPP) model. The move is part of India’s broader effort to monetise public infrastructure and expand aviation capacity.

Background & Context: Airport Privatisation in India

Airport privatisation in India aims to improve efficiency, attract private investment, and reduce the fiscal burden on the government.

• Most airports are owned and operated by the Airports Authority of India (AAI), which manages both:
  • Aeronautical assets (runways, terminals, ATC services)
  • Non-aeronautical assets (retail, parking, advertising, real estate)
• The process began in the early 2000s with the privatisation of Delhi and Mumbai airports, followed by greenfield PPP airports such as Bengaluru and Hyderabad.
• In 2019, six AAI airports were privatised, marking a shift from revenue-sharing to a per-passenger fee model.

The current round represents a new phase by introducing bundling of metro and non-metro airports.

Objectives of Airport Privatisation

The key objectives include:

• Improving service quality and passenger experience
• Modernising airport infrastructure through private investment
• Enhancing operational efficiency and managerial flexibility
• Expanding non-aeronautical revenue streams to cross-subsidise passenger charges

Privatisation is also linked to India’s long-term aviation growth strategy. With only around 6% of Indians using air travel, expanding airport capacity is seen as essential for economic growth, tourism, and regional connectivity.

Third Round of Airport Privatisation

• Covers 11 airports, grouped into five bundled packages
• Airports handle 0.1–1 million passengers annually
• Selected based on:
  • Traffic potential
  • Growth projections
  • Geographic proximity

Once cleared by the Public Private Partnership Appraisal Committee (PPPAC) and the Union Cabinet, bidding is expected to begin around 2026.

This round aligns with the National Monetisation Pipeline (NMP), under which privatisation of 25 airports was projected to raise over ₹20,000 crore. However, aviation monetisation has lagged behind roads and railways, prompting renewed policy push.

Revenue Models and Regulatory Framework

Revenue Model Shift

• Earlier: Revenue-sharing with AAI
• Now: Per-passenger fee paid by operators, indexed annually

While this provides predictable revenue to AAI, it raises concerns over higher user charges for passengers.

Regulatory Oversight

• Airport tariffs are regulated by the Airport Economic Regulatory Authority (AERA)
• AERA approves:
  • User Development Fees (UDF)
  • Landing and parking charges
  • Other aeronautical tariffs

Non-aeronautical revenues are intended to offset passenger costs, but disputes persist over under-reporting of such revenues.

Emerging Concerns and Criticism

Market Concentration

• A single corporate group controls a large share of major airports
• Raises fears of monopoly or duopoly, weakening airline bargaining power

Passenger Cost Burden

• In some privatised airports, user charges and ancillary fees have risen sharply
• Complaints include:
  • Congestion
  • High taxi fares
  • Limited accessibility services
  • Perceived decline in service quality

Regulatory Response

• AERA is moving towards service-linked tariff regulation
• Penalties proposed for failure to meet benchmarks such as:
  • Security wait times
  • Check-in duration
  • Passenger assistance standards

Analysis: Why Airport Privatisation Matters

• Reflects India’s shift towards asset monetisation for infrastructure financing
• Highlights trade-offs between efficiency gains and public interest
• Tests the strength of regulatory institutions like AERA
• Raises questions about competition, affordability, and service quality

Airport privatisation is not just an economic reform but a governance challenge.

Way Forward

• Ensure transparent and competitive bidding processes
• Impose safeguards against excessive market concentration
• Strengthen AERA’s regulatory and enforcement capacity
• Link tariffs clearly with service-quality outcomes
• Protect consumer interests while encouraging private investment

Balancing private efficiency with public accountability will determine the success of airport privatisation.