India’s State Secretary for Civil Aviation, Ashok Chawla provides his blue print for development and investment

Interview with Chris Devonshire-Ellis, Senior Partner, Dezan Shira & Associates in Delhi

The number of India’s total domestic passengers has doubled in just five years, and is set to expand even more rapidly. With more airports per square mile than any other Asian nation, a legacy of the British, much however needs to be done to upgrade, improve, and rebuild Indian airport capacity as anyone who has arrived at Mumbai or Delhi international airports well knows. But beyond the surface veneer of construction in progress, shabby terminals and dodgy washrooms, a revolution is occurring.

Ashok Chawla:
India has over 450 airports nationally, of which about 90 are currently operational. In conjunction with the Ministry of Urban Development (see other interview) we are highlighting a number of domestic airports for development which have a key strategic development role to play. However, firstly let me explain that all airports were previously managed by the Airports Authority of India, and that this has now changed. The AAI is now involved in two main models for airport infrastructure development. These are:

1) Government / Private joint ventures
Whereby the AAI representing the Indian government now takes a minority stake, with private equity providing the majority, for construction, management and handling sectors. The new Delhi and Mumbai airports are examples of this.

2) 100% Private owned airports.
We have had recent success with this in Hyderabad and Bangalore. Others will follow. Private ownership of domestic Indian airports will become the norm.

Of the 85 airports that fall into government and private JV’s, we have identified 35 of those which require significant upgrading immediately, to be completed by 2013, with another 35 to follow in the five years after that. Kolkota and Chennai are in this initial batch, in fact their redevelopment is underway now.

In terms of attracting FDI into this sector, we have made significant changes. Before, in all areas of aviation, a maximum of 49% only was permitted by the foreign partner. We have felt this was too restrictive. Now, we have divided this up into nine categories, with only one, being airports handling scheduled international passengers, still required to be 49%. For ground handling services, we permit 74% equity, and the same for helicopters, sea planes, flight training and maintenance. Cargo and chartered operations can also be 74% in favor of the foreign party.

We wish to encourage the development of regional airports, to provide better internal transportation links, and also the development of smaller, 70-80 pax aircraft to service these destinations. In all, we have earmarked expenditure of USD110 billion over the next ten years to cater for this. 80% of this will go in aircraft purchases, with the balance in airport development. This does not include air navigation, technology and other safety and navigational expenditure, which is being implemented right now. So although you may see dust and chaos in our airports right now, behind the scenes we are improving in non-visible assets.

Finally, we are appointing an independent, Airport Authority Regulator to oversee these developments so as to take the government out of the equation and limit interference.

Foreign investors are encouraged to assist with the redevelopment of India’s domestic airports – places to look at would be the 63 key cities as targeted by the Ministry of Urban Development – key business, sporting and tourism sites, to open up the country and get people on the move.

This entry was posted on Wednesday, March 26th, 2008 at 10:20 am and is filed under India, News from 2point6billion, Government, Politics, Investment, Regulatory Environment, Economy. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.