Private Sector Participation

1.      Both the reasons of bridging the yawning gap in resources as also to bring in greater efficiency in management of airports, the participation of private parties (including foreign ones) is a must. Government will take all possible steps to encourage such participation.

2.      An Airport Restructuring Committee in the Ministry of Civil Aviation will identify existing airports, in respect of which private sector involvement for development and upgradation of infrastructure is desired. It will also prepare a shelf of projects in respect of Greenfield airports. The pre-feasibility reports will be made available to private investors.

3.      The AAI will create separate profit centers for all individual airports and hive them off as subsidiary companies on a case to case basis, for the purpose of entering into commercial arrangements or joint ventures with private parties.

4.      Where airport operators desire private participation in their existing airports, all patterns of ownership and management would be open to them as elucidated in the preceding section. No Government approval would, however, be required.

5.      In case of Greenfield projects, the Central Government, the AAI, a State Government private company or a group of individuals can act as the promoter. The promoter will be required to prepare a pre-feasibility study and submit the formal proposal to the concerned State Government. The State Government will add its comments to the proposal in respect of acquisition of land, supply of water and power, construction of access roads, etc. and forward the proposal to the Central Government.

6.      The Central Government will set up an independent statutory body called the Airport Approval Commission, having adequate technical and financial expertise to examine such proposals quickly and submit its recommendations on three aspects:

a.       Whether there is need for a Greenfield airport at the suggested place, taking into account the existing airports in the vicinity and projected increase in traffic;

b.      Which is the best site, which is technically feasible and economically viable?

c.       In case there is need for a Greenfield airport and it is found to be prima facie, feasible and viable, whether it should be executed in the public or private sector or be taken up as a joint venture.

7.      On the receipt of the report of the Airport Approval Commission, the matter will be examined by the Central Government at the appropriate level for a decision. A decision once taken will normally not be subject to modification at a later stage.

8.      Once the Central Government has cleared the project, the promoter, if it is a Government body, will follow the prescribed procedure for floating global tenders in order to select the best party capable of executing the project as also to obtain the best possible terms. The tendering procedure will be transparent. The selected party would then prepare a detailed feasibility report, which would be sent to the Central Government for final acceptance. Approvals once accorded would not normally be revoked.

9.      Fiscal incentives would be provided to those involved in infrastructure projects, as maybe decided by Government for time-to-time. Currently, the following incentives are available:

a.   Hundred per cent deduction in profits for purposes of Income Tax for the first five years.

b.   Thirty per cent deduction in profits for the same purpose for the next five years.

c.  Full deduction to run for continuous ten out of twenty fiscal years of the assessee’s choice.

d. Forty per cent of the profit from infrastructure is also deductible for financial institutions providing long-term finance for infrastructure projects.

10. Such incentives should be made available not only to new companies investing in airport infrastructure but also to AAI and the existing agencies investing in upgradation of existing airport infrastructure.

11. AAI may provide air traffic control services in private airports on terms and conditions mutually agreed upon. Alternatively, it may provide ATC staff on deputation and give advice on the specifications of the equipment to be compulsorily installed for communication, navigation and surveillance.

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