Public-Private Partnership (PPP)

in
Airport Infrastructure
Ministry of Civil Aviation
Public Private Partnership (PPP)

• Designates a relationship between a

Government part y & a Private party to run
facilities and / or provide related services.

• The relationship is regulated by

a contract that allocates responsibilities, rights,
risks and rewards between the parties.
 Public Private Partnership Strategies & Tools

Three Main Strategies:

Engaging
Growing
Conversion

E G C
Public Private

Tools: Contracting, Regulations, Information

PPP IN AIRPORT INFRASTRUCTURE
Background
 Indian airports were managed by Civil Aviation
Department, Government of India, till the creation
of International Airports Authority of India (IAAI) in
1972 and National Airports Authority (NAA) in 1986.

 In 1995 Airports Authority of India (AAI) was

established by merging both IAAI and NAA by an
Act of Parliament – The Airports Authority of India
Act in 1994 – for better and efficient management
of all airports in India by a single Authority.
 At Present -

AAI manages 128 airports which includes:

- 15 International airports
- 8 Custom airports
- 25 Civil Enclaves
- 80 Domestic airports
Passenger AND Cargo Traffic Growth in
Civil Aviation Sector

International Domestic Total

YEAR No.in %age No.in %age No.in %age
million change million chang million chang
e e
2003-04 16.64 12.2 32.14 11.2 48.78 11.6
2004-05 19.42 16.7 39.86 24.0 59.28 21.5
2005-06
22.90 17.9 50.88 27.64 73.78 24.45
(estimated)
International Domestic Total
YEAR %age %age %age
Quantity change Quantity chang Quantity change
e
2003-04 693.2 7.3 375.4 12.7 1068.6 9.1
2004-05 823.6 18.8 456.7 21.6 1280.3 19.8
2005-06
(estimated)
902.7 9.6 479.1 4.9 1381.8 7.93
 Thus,
 Increased traffic and cargo growth has led to congestion/
saturation at different airports in India , e.g. Mumbai, Delhi,
Bangalore, Hyderabad, Kolkata, Chennai etc.

 Hence, country requires

 New Airports
 Expansion of capacity at existing airports
 Induction of Technology for efficient handling of Passenger and cargo.
 Better Management Practices

 For all this additional funds to the tune of Rs. 40,000 crores +
Rs. 454 crores for airports in North East are required (details
shown in next slide).
 The revenue surplus generated by AAI in 2005-06 was Rs. 812 crores.
 The annual requirement of funds in the future is expected to be much
more than the AAI can generate.
 Airport Development Fund Requirements
– Rs. 40,454 crores
Particulars Airport Indicative
Cost
Rs. In crores
Restructuring/ Delh & Mumbai 15,000
Modernization for world Chennai & Kolkatta 5,000
class airports
Green Field Airports Bangalore, Hyderabad, Goa, Pune, 10,000
Navi Mumbai, Nagpur (Hub) and
Greater Noida
Upgradation 25 selected airports 7,000
Modernization/ 55 airports 3,000
Improvement
Total investment by 2010 40,000

Dev. Of airports in North Terminal Air Side ATS Total

East Region (excluding Building/Car Facility Rs. In
Green Field Airports PRK/Cargo etc. crores

Total 225 167 62 454

 PPP IN INDIAN AIRPORTS

Need for Private Participation in Airport Infrastructure

To bridge the resource gap for achieving the following
objectives -
 To build world-class airports with modern technology and
efficient management practices.
 To make the airport user friendly and achieve higher level of
customer satisfaction.
 To lay special emphasis on the development of infrastructure for
remote and inaccessible areas.
 To provide airport capacity ahead of demand.
 To encourage greater efficiency in Airport Operations.
 To provide multi-modal linkages.
 Legal and Regulatory framework facilitating
Private Sector Participation

 Airports Authority of India Act, 1994 was amended in 2003, which,

inter-alia, provides exclusion of ‘Private Airports’ from the ambit of
AAI Act .
 The Aircraft Rules, 1937, were also amended, which, inter-alia,
provide conditions for grant of licence, validity of licence, tariff
fixation including levy of Passenger Service Fee and User
Development Fee, Ground handling provisions etc.
• Setting up of an independent Airport Economic Regulatory Authority is
under consideration
• Scope of Regulation
− Setting aeronautical price cap
− Monitoring and assessing service quality performance
standards set by the Government
− Review and assess aeronautical, operating and capital
expenditure
• Bill to be introduced in Parliament
 Airport Development Process has taken off in the
country -

The process of development of airports through PPP in

the country began with CIAL.
Two new Green field airports were thereafter approved
for Bangalore and Hyderabad.
On 3rd May 2006 the Airports At Mumbai and Delhi were
handed over to Joint Venture Companies.
Of 35 non metro airports being taken up for
modernization PPP has been approved for the city side
development of 10 airports.
Proposals for a number of green field airports have been
received from various State Govts.
 Greenfield airport - CIAL (Cochin International Airport Ltd.)
 The process for development of CIAL as a private airport began in
1993, airport was made operational on 10th June 1999.
 Investment Pattern Rs. In Crores
 Govt. of Kerala 52.04 (35%)
 Central PSU (AI, BPCL) 10.25 ( 7%)
 Commercial Banks 8.75 ( 6%)
 Investor Directors and
Relatives 55.37 (37%)
 Facility Providers
(AI,BPCL,SBT) 1.50 ( 1%)
 Public and NRIs 21.00 (14%)

CIAL Board Constitution :

Chairman Chief Minister of Kerala
MD Nominee of Gov. of Kerala
Three Directors
including Chief Sec. nominated by Gov. of Kerala
Five Investor Directors
Concessions given by GOI = Civil Enclave (Navy) at Cochin withdrawn
 Greenfield airport - Bangalore - AOD April 2008

 Greenfield airport at Devanahalli is on a Build Own Operate and

Transfer (BOOT) basis for 30 years at a revised cost of Rs. 1930
crores (earlier Rs. 1280 crores). Equity Karnataka State Industrial
Investment Development Corporation (KSIIDC) 26% and AAI
cap at Rs. 50 crores, Siemens, Germany, Unique Zurich,
Switzerland and - L&T India Limited 74%.
 Equity – Rs. 315 crores , State Support – Rs. 350 crores, Debt – Rs.1265
crores
•Concessions extended by the Govt. of Karnataka to BIAL
− SSA – Rs. 350 crs. Interest free support repayable after 10 years in 20 half yearly
installments
− Land lease Agreement – Lease of land of 4000 acres at concessional rent of Rs. 1
till commencement of operations. Thereafter @3% p.a. for a period of 6 years and
6% p.a. subsequently with an annual increase of 3%.
− Property Tax exempted for a period of 5 years.
− Stamp Duty payable on land lease exempted.
− Local Fee payable to Bangalore Int. Airport Planning Authority (BIAPA) as
betterment fee and road cess exempted.
− Entry Tax for goods for construction purposes exempted
− Infrastructure like water, power etc. to be provided at site.

The commercial flights from the existing Bangalore airport will close.
 Greenfield Airport - Hyderabad – AOD Aug. 2008

 Greenfield airport at Shamshabad near Hyderabad is being implemented on a

Build Own Operate and Transfer (BOOT) basis with Public-Private Participation.
 Govt. of Andhra Pradesh and AAI together hold 26% equity and the strategic joint
venture partners, GMR Infrastructure Ltd. with Malaysian Airport Holding Berhard
(MAHB), hold the balance 74%. AAI’s investment in the equity is capped at Rs.50
crores. Estimated cost of the Project is Rs.1761 cores .
Equity – Rs. 379 crores, State Support – Grant/Subsidy Rs. 107
crores Int. free loan Rs. 315 crores Debt – Rs. 960 crores
•Concessions extended by the Govt. of Andhra Pradesh to HIAL
− SSA – Rs. 315 crs. Interest free loan refundable in 5 equal
installments commencing from 16th year.
− Land Lease – Approx 5490 acres of land co-terminus with State
Support Agreement.
− State Grant Rs. 107 crores.
− Stamp Duty / Registration Fee waived off on transfer of land as
well as all project agreements.
− Sales Tax waived off on all construction material.
The commercial flights from the existing Hyderabad airport will close.
 Mumbai and Delhi Airports
• Salient Features of JVCs
 Objectives
 World Class Development and Expansion
 World Class Airport Management

•Equity participation
Delhi 74 % Pvt. Consortium (GMR Group, Fraport AG, MAPL, IDF)
26 % AAI
Mumbai 74% Pvt. Consortium ( GVK, ACSA,BSD)
26% AAI
•Initial Capital
Mumbai Rs. 200 crores Delhi Rs. 200 crores.
•Estimated Capital Investment for first 7 years
Delhi Rs. 3286 crs. (Funded as equity Rs. 551 crs, internal accrual
Rs. 70 crs. Debt Rs. 2665 crs.)
Mumbai Rs.5676 crs. (Funded as equity Rs. 626 crs. Internal
accural Rs. 804 crs. Debt Rs. 4246 crs.)
•The estimated costs of Stage - II (Mar. 2026)
Mumbai Rs. 10,015 crs.
Delhi Rs. 7,438 crs.
 Tasks to be performed by JVCs
Apart from Managing and running the airport the
JVCs have to invest for the mandatory and other
capital works.
Performance Standards
 The JVCs are to achieve a rating of 3.5 on the AETRA
scale of 5 on completion of stage-I and improve to 3.75
by stage-II.

• Payments to AAI
• Upfront payment of Rs. 300 crores(RS.150 crores from each
JVC).
• Annual Revenue Share to AAI for a period of 30 years.
• Delhi Airport 45.99% of Gross Revenue
• Mumbai Airport 38.7% of Gross Revenue
• AAI employees’ cost to be reimbursed by the JVCs
 MODERNISATION & RESTRUCTURING OF
MUMBAI & DELHI AIRPORTS

Salient Features of State Government Support

Agreement (SGSA):
 The SGSA has been executed by the respective State Governments
with the JVCs in order to provide support to the projects.
The agreement provides that the State Governments will make best
efforts to provide support to the JVCs in matters relating to removal of
encroachment or procurement of additional land for development of
airport, removal of obstruction outside the airport boundary to ensure safe
and efficient air traffic movement, best endeavor to improve the surface
access to the airport and to provide all the utilities namely water, power
etc.
The SGSA provides for assistance in procuring various clearances.
However, the agreements do not confer any right to JVCs for enforcement
of any obligations of State Government or consequently for any damage
or loss incurred by JVCs or by any party.
 DEVELOPMENT OF NON – METRO AIRPORTS

Development of 35 Non-Metro Airports have been taken up in

a phased manner :
These airports are
Ahmedabad, Amritsar, Agatti, Aurangabad, Agartala, Agra,
Baroda, Bhopal, Bhubaneshwar, Chandigarh, Coimbatore,
Dehradun, Dimapur, Guwahati, Jaipur, Jammu, Khajuraho,
Nagpur, Patna, Portblair, Pune, Rajkot, Ranchi,Raipur, Goa,
Imphal, Indore, Lucknow, Madurai, Mangalore, Trichy,
Trivandrum, Udaipur, Visakhapatnam and Varanasi,

Development Approach for first ten non-metro airports

• Terminal Building and Airside development by AAI.
• City side development through PPP or Land Lease and
Revenue Sharing (Airport wise in a single package)
Development of Green Field Airports- North East Region

a)PAYKONG AIRPORT – Sikkim for 50 Seater Aircraft (ATR 72)

Estimated cost Rs. 340 Crores (excluding land cost which will be provided by
State Govt. free of cost).

b)CHIETHU AIRPORT – Nagaland for 50 Seater Aircraft (ATR 72)

Estimated cost Rs. 150 Crores (excluding land cost which will be provided by
State Govt. free of cost). Rs. 1 Crore has been paid by NEC to AAI for Techno-
Economic Feasibility Study.

c)ITANAGAR – for 50 Seater Aircraft (ATR 72)

Estimated cost Rs. 120 Crores (excluding land cost which will be provided by
State Govt. free of cost). Banderdeva site seems to be technically feasible. Site details
awaited from State Govt. for further technical feasibility study.
Development of Greenfield Airports –
Proposals received from state govts.

MOPA - GOA
Gangtok – Sikkim
Navi Mumbai, Maharashtra
Chakan, Pune, Maharashtra
Kannur, Kerala
Kohima – Nagaland
Hassan & Gulbarga – Karnataka
Halwara – Punjab
Itanagar- Arunachal Pradesh
Thank You