PPP In Airport Development
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Content
- PPP Definition
- Various PPP models used in airport development in India
- Critical analysis of development of airports in India using Joint Venture
PPP Definition:
Public-Private Partnership (PPP) models have been utilized in the development of airports in India to leverage private sector expertise, investment, and efficiency while ensuring public control and oversight.
Various PPP models used in airport development in India are:
i. Build Operate Transfer (BOT):
- E.g., Delhi International Airport Limited (DIAL): DIAL was formed as a JV between AAI and GMR Group. The consortium obtained concession rights to design, finance, construct, operate and maintain the Indira Gandhi International Airport in Delhi. After the concession period of 30 years, airport will be transferred back to AAI.
ii. Design-Build-Finance-Operate-Transfer (DBFOT): This model is similar to the BOT model, but the private entity is also responsible for the design and construction of the airport facility. The private entity finances, builds, operates, and maintains the airport for a specific period, and then transfers it back to the public authority.
- The Bangalore International Airport Limited (BIAL) Project follows the DBFOT model.
- A consortium comprising Siemens Project Ventures GmbH, Larsen & Toubro Limited, and Unique Zurich Airport developed and operated the airport. The consortium financed the project, designed, and constructed the airport, and operated it for a concession period of 30 years. At the end of the period, the airport will be transferred back to the government.
iii. Operate Maintain Transfer (OMT):
- E.g., Chhatrapati Shivaji International Airport (CSIA), Mumbai
- It is owned by AAI, and Mumbai International Airport Limited (MIAL), a joint venture between GVK-led consortium and AAI, operates and manages the airport. MIAL receives the management fee based on performance targets.
iv. Joint Venture:
- E.g., Cochin International Airport Limited (CIAL):
- Cochin International Airport Limited (CIAL) was formed by a joint venture between the government of Kerala and a consortium of NRIs. The consortium provided the necessary capital, and the airport was developed and operated jointly by the government and the consortium.
Critical analysis of development of airports in India using Joint Venture:
i. Positives:
- PPP models has helped in improving infrastructure and services at some of India’s
busiest airport, without increasing government’s fiscal burden. - For e.g. airports in Delhi and Mumbai have undergone major expansion and
renovations under PPP model. - Government is able to focus on regional connectivity more.
ii. Challenges/Limitations:
- It has been difficult to attract private investors to airports as airports are often seen as
risky investments, as they are subjected to fluctuation in air traffic. - Higher airport charges for passengers
- Other general challenges with PPP (done in previous topics – Contract issues etc.)
- Overall, the development of airports using PPP model has been a mixed bag in India.