As Airport Monetisation Plan Gains Traction, Can't Ignore Stagnant Growth, Job Losses in Aviation Market

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Whether it is cost-overruns, the inequitable partnership or the fact that consumers have had to pay additional fees, this is an area that needs to be looked ...
The Government of India and the NITI Aayog recently announced a comprehensive plan for the national monetisation pipeline. The plan builds on earlier announcements by the government for investment in infrastructure and envisages investments of more than Rs 111 lakh crore over a five-year period. About 4% of this value will come from the sale of 25 airports to private parties in addition to divestment of residual stakes held by the government in the country's four largest airports. It is an issue that no doubt will lead to intense debate.

The airport capacity challenge

Airports are key pieces of infrastructure and it is no surprise that they find themselves figuring in the national monetisation pipeline. Air travel in the country continues to be a story of contrasts until recently when the Indian aviation market was witnessing phenomenal growth. This was driven by an emerging middle class, increased propensity to spend and very low air-travel penetration. Rising household incomes and a middle-class expected to double in the next decade were key to this growth. The emerging consumer segment or the core middle class was expected to grow by 1.5X and this segment was increasingly taking to air as a mode of transport.

The market grew by leaps and bounds. From a mere 36 million passengers in 1996, passenger volumes doubled to 73 million in 2006. As more passengers took to the skies, passenger volumes quadrupled to 341 million in 2019. And despite a rapid growth in aviation, the market was far from saturation. The only challenge: airport capacity. Put simply, airports were just not able to keep up with the demand as witnessed by delays — across the tarmac and the terminal. And investment in airport capacity that included new runways and new access roads was the need of the hour.

India's airports and operators

To build an airport capacity a significant capital investment and talent is required and the government chose the public-private-partnership route to divest…
Satyendra Pandey
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