Above: Thiruvananthapuram International Airport has suffered due to the predilection shown by the state government towards the Cochin airport/Photo: Muhammed Suhail/commons.wikimedia.org
As the Kerala chief minister Pinarayi Vijayan resists the handing over of the Thiruvananthapuram airport to the Adani group, his reasons for doing so are surprising as the conglomerate already has a presence in the state and has much to do with the Cochin airport
By NV Ravindranathan Nair in Thiruvananthapuram
The decision of the Airports Authority of India (AAI) to hand over the management, operation and development of the Thiruvananthapuram International Airport to the Adani group has not gone down well with Kerala Chief Minister Pinarayi Vijayan. He has vehemently opposed the move, saying that no private player can manage the airport without the state government’s support. He seems to have made this a prestige issue and has started building resistance against the move.
Private investment is not a matter of anathema for the communist chief minister as the communists have already changed their mindset towards it. Moreover, he is rolling out the red carpet for investors from across the globe, though not many have shown much interest yet. “No authority can take the airport and hand it over to a private party ignoring the opinion and demand of the state government. No private player can manage or develop the airport without the cooperation and support of the state government. We have raised the issue several times and I would personally apprise the issue and clarify the state government’s stand to Prime Minister Narendra Modi,” he told the state legislature. He took up the issue with Modi when he arrived in Delhi to attend a NITI Aayog meeting recently.
There is no reason to believe that the state government has developed a xenophobic attitude towards the Adani group; the latter already has operations in the state after winning the prestigious Vizhinjam International Sea Port project in Thiruvananthapuram. And in its effort to meet the target of completing the project in the stipulated timeframe, it is working hand in hand with the state government.
However, the chief minister’s warning that no force can operate or manage the airport without the cooperation of the state government has to be taken seriously. The communists have a track record of defeating entrepreneurs and warding off investors in the past several decades, causing the negative growth of industries in the state.
The AAI had decided to hand over six airports for operation and management to private players as part of its policy, and the Thiruvananthapuram airport was one among them. The state government had intimated its displeasure over this move in 2018 itself. Its effort to take over the airport by setting up a special purpose vehicle under the Kerala State Industrial Development Corporation (KSIDC) met with a setback when the Adani group emerged as a winner, beating the KSIDC and another private entity, GMR, which is in charge of the operation of Delhi and Hyderabad airports, in the bidding held in February 2019.
The state government is of the view that handing over the airport to a private player with no experience in airport management will be a disaster. But that is not true as Cochin International Airport Ltd (CIAL), a public-private partnership (PPP) model project set up during the time of K Karuanakaran as chief minister, proved to be a huge success in managing, operating and developing the airport.
CIAL and its fully owned subsidiary, Cochin Duty Free and Retail Services Ltd, had registered a cumulative turnover of Rs 669.06 crore for 2016-17. CIAL’s profit (after tax) then was Rs 179.45 core. The company declared a dividend of 25 percent to 18,300 investors spread across 30 countries. The government of Kerala has a stake of 32.42 percent in the company. Dividend is being paid unfailingly since 2003-04 and the total payout has touched 203 percent. So far, the government has received Rs 193.53 crore as dividend from the company. During 2016-17 alone, CIAL handed over Rs 31 crore as dividend to the state government.
CIAL’s success continued even in passenger footfalls and it stood fourth in the country in terms of international passenger traffic. It handled 8.94 million passengers during 2016-17, which was 15.06 percent more as compared to the previous year. That financial year witnessed the commissioning of many big projects, including the 1.5 million sq ft Terminal-3. The airport got international acclaim for its efforts in adopting green ideas and became the first to be fully powered by solar energy in 2015. The installation capacity of its solar plants has been scaled up to 40 MW during 2017-18 from 23.2 MW during 2016-17. All this was made a reality while remaining a PPP model airport.
However, as CIAL surged ahead, the Thiruvananthapuram International Airport kept slipping to a new low, recording a sharp decline in its passenger traffic. The airport had fallen behind on several fronts. The interest of the state government and the private partners owning CIAL have also tried to boost that airport at the cost of the Thiruvananthapuram airport.
A senior AAI official who did not want to be named told India Legal: “The fear that employees would lose their jobs had no basis. Employees at the six airports currently run by AAI will have the option of joining the Adani group or staying with AAI.” AAI will get Rs 1,300 crore annually from the privatisation of the six airports, as per an internal estimate by the Authority. With these earnings, AAI can go ahead with developing interior airports.
The state cannot raise any complaint against AAI’s decision as the Adani group had outbid aggressively for the airports, exceeding offers by GMR, the country’s biggest airport manager. While the chief minister is unrelenting in his demand for retaining the airport in the public sector, it has not gone down well with airport users. They are of the view that privatisation will only help the Thiruvananthapuram airport. Airport Users’ Consultative Committee office bearers such as Raghuchandran Nair have expressed their dissent.
The state government needs to realise that airports such as Mumbai, Delhi, Hyderabad and its own CIAL are run on the PPP model and are doing well. Also, the Adani group won the bid for the Thiruvananthapuram airport after quoting the highest price among all financial bids and despite the KSIDC being given the concession to quote 10 percent less compared to the highest bidder. The Adani group offered Rs 168 per passenger to AAI, while the KSIDC offered Rs 135 and GMR, Rs 63. The airport’s annual passenger traffic is nearly 4.5 million.
While the chief minister is rolling out the red carpet for NRI businessmen across the globe to attract investment, his opposition to awarding the contract to the Adani group does not hold water. The claim that there would be job losses for AAI employees also does not stand as only the management, operation and upgrading will be vested with the private player, while strategic activities such as air traffic control will remain with AAI only. And there have been examples of the employees being given the option of retention or VRS with a golden handshake as was done at Mumbai, Delhi and Hyderabad. Also, the state government has claimed that it acquired the land and handed it over free of cost to AAI as is the general norm. But the fact is that AAI is not handing over ownership of the airport land to the private party, but only leasing out its operation, development and management.
It was in November last year that the government cleared a proposal for managing six AAI-run airports on a PPP basis. A total of 32 technical bids were received from 10 companies. Ahmedabad and Jaipur airports received seven bids each; Lucknow and Guwahati six each and Mangaluru and Thiruvananthapuram three each. AAI had also sought bids for the operation and management of existing airport assets and upgradation, development of additional air-side terminals, city-side and landside infrastructure for 50 years for Ahmedabad, Guwahati, Jaipur, Lucknow, Mangaluru and Thiruvananthapuram airports. Adani won the right to upgrade and operate airports in Ahmedabad, Lucknow, Jaipur, Mangaluru, Guwahati and Thiruvananthapuram for 50 years.
The state’s opposition to handing over the contract to the Adani group has no ideological basis. It’s an open secret that governments that came to power ever since the setting up of CIAL had a special liking for it as they had a personal obligation to please the private interests of CIAL’s partners, mainly NRI businessmen from the state, at the cost of the Thiruvananthapuram airport.
In this highly competitive field, the winners will have to face many hurdles.