Airport Privatisation: Centre Plans Cap on Bidders’ Bundles

The government plans to limit the number of airport bundles awarded to a single bidder to reduce market concentration risks.

Airport Privatisation:It appears that the Centre is now set on capping the number of airport packages that a single bidder could have in the upcoming bidding process for airport privatisation to mitigate any concerns of market concentration in the Indian airport industry. The cap, which will see the government award five airport packages to five different bidders for the next 50 years, will be introduced as the country proceeds with the privatisation of 11 airports.

Ministry Proposes Limits on Individual Bidders

Ministry of Civil Aviation has suggested imposing a limit on the number of airport bundles that a single bidder would be allowed to obtain through the coming process of privatisation. The suggestion was made to the Public Private Partnership Appraisal Committee (PPPAC). This was done in reply to a question put up by the PPPAC chairman and Department of Economic Affairs secretary Anuradha Thakur at a meeting held on August 4 regarding the coming airport privatisation scheme. It may be mentioned here that PPPAC gave in-principle approval to the suggestion.

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Concerns Over Market Concentration

Currently, there exist two key groups running private airports in India, namely, the Adani and the GMR groups. The dominance of airport services by a few large firms in the industry has led to the fear of the existence of oligopoly within the sector. The proposed constraints on bidding aim at fostering competition within the sector.

11 Airports to Be Offered in Five Bundles

As per the proposed scheme, 11 airports are to be bundled into five different bundles. The winning bidders will get operational rights for 50 years. Bundling airports helps in making the airports more lucrative for private players and may even allow weaker airports to be bundled along with better airports. The cap suggested by the government will determine the number of bundles that will go to one bidder.

Balancing Private Investment and Competition

The privatization policy for airports is an indication of the government's ongoing attempt to increase the involvement of the private sector in the Indian aviation infrastructure. On the other hand, the government is also trying to ensure that this involvement does not create problems of too much market concentration. Restricting the number of packages available to a single bidder could make the airport operations environment more competitive. The future of India’s airport privatization will depend on how this policy will unfold.