Airport Modernisation: The Real Issues
If
anyone had any doubts about the misleading analysis and suppression
of information purveyed by most of the mainstream media, these doubts
should be dispelled by the latest evidence with respect to the recent
strike by airport employees. This has been widely reported as the retrogressive
actions of some employees who simply want to keep their jobs and are
therefore impeding modernisation.
The
chaos and mess at airports and the inconvenience of passengers has been
described in the media in the most agonised terms, with frequently expressed
fears about how this strike will adversely affect India's ''international
image''. In the process, the real reasons why the airport employees
have taken the decision to strike, and issues relating to the modernisation
or privatisation of airports, have actually been suppressed.
The argument is being presented as one in which those who want to expand
and modernise India's airports are being prevented by a bunch of backward
looking trade unionists who want everything to remain the way it is.
But this is the opposite of the truth. The workers' fight against privatisation
is based on the argument that a perfectly acceptable and desirable plan
for modernising the airports has been available, presented by the Airports
Authority of India to the Cabinet nearly three years ago, using the
available cash reserves of the AAI as well as borrowed funds.
In fact, if the central government had not deliberately held up this
plan, the country could already have been benefiting from the latest
and most modern airports especially in the metros. Instead, this proposal
was suppressed, because the basic aim of both the previous NDA government
and the current UPA government has been to hand over airports to the
private sector. So this is a clear case in which a public sector organisation
has been run down and not allowed to modernise using its available reserves,
to pave the way for eventual privatisation.
As a result, there is no question now that most of our large airports
are in a mess, badly short of space and services, and desperately in
need of renovation or even complete overhaul. This has adverse implications
which go beyond the convenience of passengers, since airports have become
important hubs of trade and so this affects cargo trade and commercial
promotion generally.
There are now many examples of different ways of managing airports.
The experience so far suggests that even where airports have been ''privatised'',
in most cases this has not meant the actual transfer of ownership or
even control.
This is because airports, and especially those which are major national
or international hubs, fall very clearly in the category of strategic
infrastructure assets, and it is usually seen as crucial to maintain
some degree of national control. This is why most governments - even
champions of privatisation such as Australia - have put definite restrictions
and caps on the proportion of foreign investment and the actual control
exercised by foreign parties.
Add to this the fact that airports are by definition natural monopolies,
since location-specificity implies that there is no real choice, except
perhaps for airlines in the process of choosing which ''hub'' to use.
Otherwise, it is hardly possible, say, for passengers to say they would
prefer to fly to Chennai than to Delhi because of better airport facilities
in the former. This feature of being a natural monopoly means that if
an airport is not under direct public control, it must at least be under
strong public regulation to ensure that unfair monopolistic practices
do not become rampant.
Internationally, the most successful examples of airport management
typically involve some amount of private outsourcing for particular
activities while retaining overall public control. Thus, many airports
have successfully brought in private parties to invest in cargo handling
facilities or even whole terminals, hangars and parking bays, servicing
and overhauling facilities, marketing and shipping yards, export zones
and so on. Such contracted services dominate as the main form of ''privatisation''
in most airports in the US, Europe and Japan.
There is a further point. Obviously, the development of airports has
to be in accordance with a master plan for the relevant urban area,
which considers the overall development of not just the airport but
also the surrounding region. Therefore it clearly cannot be undertaken
by any private party in isolation, but requires the involvement of local
government bodies, industry associations and other groups.
The issue of cross-subsidisation is also important. This is probably
the most important feature of most transport networks which has encouraged
public holding of such facilities. Thus, railways in India use profits
from heavily-used routes to finance losses from providing services to
more remote and less heavily trafficked areas. The same is true of the
public airlines - it is obvious that most private airlines only flog
the very profitable inter-metro routes and avoid smaller cities and
towns which nonetheless require such connectivity.
Similarly, thus far, the AAI has used the profits made from major metropolitan
airports (such as Delhi and Mumbai) to promote and support the development
of airports in other cities, smaller towns and more remote locations
which would not command the same interest. Mumbai and Delhi airports
are the most profitable and heavily used airports in India, and losing
them would dramatically reduce the funds available with AAI to develop
other airports.
AAI is currently one of the more profitable public sector companies,
with reserves and surplus funds of Rs. 3,000 crore, and almost zero-debt
status. This can easily meet the anticipated expenditure for the development
of the airports of the country, including those in Delhi and Mumbai,
especially since the corporation can leverage this healthy financial
condition to raise loans from the market.
Instead, the UPA government has clearly gone against the promise made
in its own CMP, and opted for straightforward privatisation without
adequate consideration of the security, strategic and other issues.
And the entire bidding process has been extremely irregular and full
of impropriety, leading to accusations of subjectivity and manipulation
to favour certain parties. It led to a situation where only two bids
were treated as viable for the two airports, implying no contest. Even
the highly respected outside expert appoint by the government, Mr. Sreedharan,
pointed to flaws in the criteria used for shortlisting, and in effect
suggested that the entire bidding process be reopened.
In such a background, it should be evident that the airport workers
on strike were not fighting for their own jobs or wages, but for what
is the national interest. Instead of recognising the real issues and
creating the basis for a genuine national debate, most of the mainstream
media has chosen to obfuscate and suppress the vital information which
matters as much for the future of the country.