K V Priya
July - September 2017
Partner and Head, Aerospace and Defence KPMG, India
Amber Dubey, partner and India head of aerospace and defence at global consultancy KPMG tells AIBM that India can’t afford to miss the golden opportunity of developing its airport infrastructure and believes strongly that building airports should be left to private players.
Airport operators and governments in Asia are competing to build bigger and more airports. How do you see India’s part in this resilient aviation story?
India is the fastest growing economy among the top ten economies. It is also the fastest growing aviation market in the world for the last 24 months. If there is one place where airport infrastructure needs to catch up quickly with the growing demand, it is India.
What is your take on the current policy regarding infrastructure development?
The National Civil Aviation Policy (NCAP) has fixed 30 pc ‘hybrid till’ as the norm for tariff fixation. This had been a long pending demand of the private airport operators. We may see greater investor interest in the airport sector after this. Some airports like Jaipur and Ahmedabad are likely to be handed over to private operators. It’s a good move that will help Airports Authority of India (AAI) improve terminal infrastructure and commercial revenues. The top 25 to 30 AAI airports should be leased out to private operators and made to compete with each other. The lease revenue earned and capital expenditure saved by AAI should be used to revive non-operational airports in the country.
AAI needs to share its plan for airport infrastructure augmentation to the public domain. Most of the top AAI airports are likely to get choked in the next five to ten years. The entire cycle from land acquisition to airport commissioning takes around eight to ten years or more. If things are not taken up on a war footing, we may see a repeat of the Mumbai fiasco all over again. India’s commercial capital is choked since the alternate airport at Navi Mumbai that should have come up a decade ago has yet to commence construction.
How do you see emergence of infrastructure in aviation sector developing in India?
The Ude Desh ka Aam Naagrik (UDAN) scheme is designed to take flying to the interiors where India’s untapped potential lies. It will lead to industrial and real estate investments, tourism and job creation – something India sorely needs. No government in the past has treated aviation with the importance it is getting now. One hopes that the government pushes Public–Private Partnership (PPP) hard for greenfield and brownfield airports.
According to the Civil Aviation Secretary a sum of USD 10 billion will be spent in the next five years to develop airport infrastructure so that India can become the world’s third largest aviation market within seven years.
Hopefully, we won’t have to wait long. We are number four right now, within touching distance of Japan at number three. We will overtake Japan before 2017 gets over. The next target is to be ‘No 1 by 2030’, and for that we may need around USD 40-50 billion to build world class airports over the next 10-15 years. The number pales in comparison with Dubai’s second airport – Al Maktoum International Airport in Jebel Ali – being built at an estimated cost of over USD 80 billion.
What is your opinion on the projects built and operated by AAI and those under PPP mode?
Airports are a business and the government has no business to be in business. Government’s role comes in where there’s a lack of private enterprise – like in rural education and healthcare. The top 25-30 airports of AAI should be leased out to private operators in a phased manner.
AAI is preparing new set of regulations for monetisation of its land assets so as to reduce its dependence for revenue on aeronautical sources.
It is long overdue. AAI should find a way to monetise its land assets to generate commercial revenue. It will help it reduce the aeronautical charges and make flying more affordable. Many AAI officials may be perpetually worried about victimisation in case of any unjust allegations of wrong-doing in land transactions. That may lead to undue paperwork, layers of over-scrutiny and loss of valuable time. Hence, it is best to leave the tricky business of airport land monetisation to the private sector.