The Centre's recent decision of constructing a greenfield airport at Kannur in Kerala as a state government-private sector partnership is a welcome move. Going by current plans, Kannur Airport will be developed through a 74:26 partnership between the Kerala government and private entrepreneurship. What is most significant is that Centrally-owned Airports Authority of India is not envisaged to have equity partnership in the project.
Of course, it must be mentioned that the Cochin International Airport, also in Kerala, is the only private initiative so far where AAI does not hold equity stake. This airport, however, was the result of a need-based effort of mostly NRI Keralites that pooled together to construct the airport to cater to their own requirement. Cochin Airport did not arise out of government policy, unlike Kannur Airport. Private sector airports are also coming up in Bangalore and Hyderabad, but AAI is a shareholder, albeit with minority equity stake.
If the Kannur Airport model succeeds, it will herald a new era in Indian airport development, particularly in rapidly urbanising non-metropolitan cities. For Kannur Airport, the Centre has stipulated that critical areas - mainly security and air traffic control - would be done by Central government agencies, mainly AAI, but strictly for a fee and without equity stake. Thus, for AAI, the involvement will be that of a service provider and not of a developer. The business risk will be borne by the private developer, but security will not be compromised. This is perhaps the best model that future Indian airports can look forward to.
Two years ago, the civil aviation ministry had mooted the proposal of merchant airports where private sector developers in possession of large land parcels could set up airports, although with conditions. This proposal has not made much headway, going by press reports. Leading airport developers believe that in the Indian context, the PPP model is best suited given that land acquisition is a critical factor and that government agencies are best equipped to address the issue.
AAI not having equity participation in new airports will also bring about competition between its own airports and the newer ones to come. This will result in efficiency. The Centre, it is learnt, is also considering relaxation of guidelines governing proximity of new and existing airports. This will spawn airport projects. Navi Mumbai Airport has been approved in spite of it being within the 150-km radius of the Mumbai Airport. Similar concession has been accorded to the Noida airport that is close to the New Delhi International Airport.
Restricting Central government control to only core issues and liberating AAI from equity participation defines a healthy paradigm for Indian aviation infrastructure. This can ably support and sustain the country's air passenger traffic that is today galloping at unprecedented rates. In the first eight months of 2007-08, total traffic at 75.83 million passengers was 27 per cent higher; this growth is over and above a 31 per cent increase in 2006-07. Indian airports are expected to handle 120 million passengers in 2007-08, which will be twice the level just three years ago.

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