(Weekly Organ of the Communist Party of India (Marxist)
April 27, 2008
NEW METRO AIRPORTS
Private Profit, Public Chaos
EVERYTHING in infrastructure or services in India these days has to be “world class”. And according to liberalisers in government and outside, especially in the media, this must mean owned and run by the private sector preferably with foreign collaboration. The now familiar argument is that the state sector, again by definition, is incapable and that foreign partners will bring in much-needed capital and, more importantly, the “latest” in advanced technologies and management, while the consumer would be king in this “open” environment. Undeterred by experiences of the Enron fiasco or privatisation of electricity distribution, which clearly showed that private monopolies are in fact the anti-thesis of cost-efficiency and consumer friendliness, the UPA government adopted the very same approach to modernisation of India’s airports beginning with the metros. And once again, arguments against this course advanced by numerous expert commentators, progressive sections, trade unions and even the public sector Airports Authority of India (AAI), were brushed aside.
The results are there for all to see, whether it is greenfield airports as in Bengaluru and Hyderabad, or upgraded airports in Delhi and Mumbai. Having been given a completely free run, with no oversight or regulation, the private operators and their foreign collaborators have developed under-capacity infrastructure, pushed up costs to both airlines and passengers, caused enormous chaos and public inconvenience, and have cut many corners for the sake of short-term profit. Since the government has chosen a particular and rather rare model of privatisation (from the many others available internationally) in which the operators in effect have clear ownership and full management of the airports, the necessary linkages with related urban planning and infrastructure have also been absent leading to poor connectivity and city-side services, and more chaos all round.
POOR PLANNING &
Delhi airport epitomises these problems in the case of “upgraded” airports. National newspapers and TV channels have recently been full of horror stories about the conditions obtaining at the now privatised airport in Delhi, owned and run by the Delhi International Airport Limited (DIAL) of the GMR Group in collaboration with Fraport, owner-manager of Frankfurt airport in Germany.
Before privatisation, Delhi had capacity to handle 12 million passengers per annum (mppa) whereas traffic had doubled between 2003 and 2006 when it had reached 20 million, with 2007 seeing 28 per cent growth. The capacity planned by DIAL during the first phase of upgradation is 33 mppa by March 2010. If current traffic growth rates above 25 percent per year are maintained or exceeded, which is certain, the upgraded airport would already be over-saturated by the time it is commissioned!
GMR-DIAL has been making tall claims about “being ahead of the curve”, claiming they would build capacity of 43 mppa even by 2010. In fact, simple back-of-the-envelope calculations would show that traffic in Delhi is most likely to cross 50 million by then! Indeed, traffic growth projections have been consistently underestimated, the present growth rate for instance being more than double industry forecasts made as late as 2002. Therefore, at each phase of the expansion, as now, GMR-DIAL will be playing catch-up, always a few steps behind actual requirement. There can be little doubt that the new airport, even after it is fully finished, will be plagued by congestion and under-capacity, a far cry from the “world class” paradise promised.
Lack of foresight is also plainly evident in the phase-wise expansion underway. Passengers at the international departure terminal are taking more than four hours in long snaking queues to clear terminal entry, check-in and passport formalities, and numerous passengers are simply missing their flights each day. Bottlenecks have included less than the required number of entry points, check-in counters and even X-ray machines, none of which have been addressed just to save money in the short-term while passengers suffer.
Such capacity shortage and resulting difficulties were precisely the problem earlier too, but the government joining in the chorus of blaming the public sector AAI which was then systematically undermined by being denied funds for upgradation despite repeated requests. Till their shortcomings came to be regular features in the media, GMR-DIAL were proceeding leisurely with scarcely a thought for passenger discomfort. Now, the company has begun to issue daily newspapers advertisements asking for patience while upgradation goes on! No doubt, upgradation is time-consuming and causes some inconvenience, even if temporary, but such a grace period has been denied to AAI by these same private parties, their supporters in government and the globalising classes.
These problems should have been anticipated, as indeed they were by many commentators, and provided for during upgradation as well as in the final plan. But they have not been: poor planning, shabby implementation, and a callous attitude to passengers remain the order of the day.
All the new airports at Delhi, Mumbai, Hyderabad and Bengaluru are grossly under-capacity in terms of all important parameters: runway, aircraft stands, exit gates, aero-bridges, check-in counters. In each case, the ratio of these to passenger traffic is roughly half of what has been provided in the airports run by the collaborating foreign partner in Zurich, Kuala Lumpur or Frankfurt. In each of these, installed capacity is roughly double current traffic: KL, for instance, handles about 25 million passengers with capacity for 50 million. India’s new “world class” airports have barely enough capacity to cope with present traffic.
So where is the much vaunted superior technology and managerial skills that privatisation and foreign collaboration was supposed to bring in? That these are empty promises become even clearer when we look at the greenfield projects where problems of upgrading an existing, functional airport should not arise.
The new “world class” airport at Bengaluru (and the one in Hyderabad) were to have ushered in a golden era in civil aviation infrastructure in India. And the existing airports are to be closed.
The new Bengaluru airport, owned and being built by Bengaluru International Airport Limited (BIAL), a consortium of companies led by Larsen and Toubro, with Zurich Airport as the collaborating partner, began in utter confusion and continues in the same vain. The initially planned capacity of 5 million passengers had to be hastily revised at the time of signing the agreement to 8 mppa gradually building up to 11 million mmpa by 2015, itself revised upward from 10.5 million by 2010 as per the original BIAL-commissioned study conducted by Lufthansa Consulting. But all the foreign corporates had got it completely wrong! The existing HAL Airport already handled over 10.5 million passengers in 2007! So, BIAL will be severely under-capacity on the very day it opens! BIAL’s projection is for 12 per cent annual traffic growth as against over 26 per cent witnessed in Bengaluru and nationwide. Bengaluru should have had capacity to handle 20-25 mmpa by 2015 latest, not only far exceeding current terminal capacities but easily exceeding even the maximum capacity of 17 million of the single runway which, incidentally, is not designed to handle the A-380 super jumbos likely to commence international operations in India next year.
The model of “clear and free” privatisation preferred by the government has meant a total disconnect between the airport itself and issues of connectivity, city-side facilities and urban planning which should be integral parts of planning airport infrastructure. An airport is not just a set of civil works to be dumped somewhere, leaving other aspects to take care of themselves. This is the main reason why most countries and cities prefer a state structure with built-in inter-agency collaboration while bringing in private players through different institutional mechanisms such as long-term leases or management contracts.
The new airport at Bengaluru is 35 km from the city centre to the north and 50 km from Electronics City and the IT hubs in the south, closer to the HAL airport. Travel time from the new airport is 1 hour to reach even the northern city limits, about 2:30 hours to the commercial district and 3:45 hours to the IT hub, not to mention additional delays that could be caused by the notorious Bengaluru traffic. International IT businessmen would do better flying in to Chennai and driving down from there in more or less the same time, and motoring between the metros would be more attractive than flying.
Despite these capacity and connectivity problems, the governments at the centre and in Karnataka, as well as BIAL, insist that the HAL airport be closed down. But BIAL at the same time wants HAL airport be used for helicopter or even jet shuttle services to the new airport so as to overcome connectivity problems! But only for business class passengers at a small charge of Rs 1500! A cruel joke indeed.
To add insult to injury, a User Development Fee (UDF) of around Rs 750 per passenger would be charged for using these “world class” facilities at the new airport. Provision for UDF is made in contracts with the private operators, although its amount is nowhere mentioned and is supposed to be related to costs, leaving the door open to arbitrariness and lack of transparency. While passengers thus lose heavily, so too do other users of the airport. For instance, a “throughput charge” of Rs 2150 per kilolitre would be charged from fuel companies for use of facilities provided by the airport. These charges would naturally be passed on to the airlines, who would further pass them on to passengers! While the airport operators are set to gain, this is a lose-lose situation for airlines and passengers both, and the growing Indian civil aviation sector can only suffer as a result.
Low-cost carriers and their users will be the hardest hit, dealing a heavy blow to the on-going broadbasing of the civil aviation industry. User fees would even exceed the price of air tickets especially on short-haul sectors, such as Hyderabad-Bengaluru, and certainly dampen demand. The civil aviation ministry has recently announced a grand plan to promote regional connectivity especially to Tier-2 and Tier-3 cities, through a new category of carriers, the Scheduled Air Transport (Regional) Services. These too will be severely hit by user fees. In the face of widespread protests by consumers and airlines, the new Hyderabad airport has already announced deferring of user fees from domestic passengers at least for the coming four months pending an audit of airport construction and running costs. But BIAL has refused to follow suit.
PRIVATE INTERESTS OR
THE LARGER GOOD?
The closure of the existing airports in Hyderabad and Bengaluru would be a further loss to users, airlines, staff and the numerous people engaged in transport, catering and other services at a busy metropolitan airport. The Parliamentary Consultative Committee on Civil Aviation has strongly recommended that these existing airports be kept open but the minister and other authorities have rejected this amply justified demand.
We have seen that due to gross underestimation of growth and poor planning, the new airports would not be able to cope with estimated traffic. BIAL CEO Albert Brunner argues that demands to keep the old airports functioning are usual in such cases but that a city the size of Bengaluru does not require two airports. Numerous cities around the world testify to just the opposite, dividing the airports between domestic or regional short-haul flights and longer domestic and international ones. Captain Gopinath of Deccan Aviation has argued that, with the opening up of civil aviation in India, if passengers could be allowed to choose airlines, why not allow them to choose airports? In Bengaluru and Hyderabad, the existing airports could similarly be kept open for low-cost carriers, regional flights, courier services, executive jets and so on. All categories of users and service providers would gain. The new private operators may lose some revenue in the short term but not in the longer term when expanding traffic would more than make up.
Both the government and the private operators have cited contract provisions supposedly calling for existing airports to shut down. Closer reading of the official aviation policy governing these contracts suggests that this is not as water-tight as it is made out to be. The policy actually states that no new or greenfield airport would “normally” be allowed within 150 km unless special circumstances warrant it. Well, the government has just given approval for a Greenfield airport in Greater Noida outside Delhi which is much nearer to the Delhi airport than in these cases, and the capacity issues and costs to budget carriers and their users are special enough circumstances. It remains to be seen what will come of the recent ruling of the High Court in Bengaluru that the old airport in the city be kept open!
Question is, will the government take the necessary action and correct an obvious wrong in favour of the common good or simply allow short-term commercial interests of a few parties to prevail?
Further, modernisation of 35 non-metro airports has been initiated under the aegis of the AAI but involving private players in different ways. Will the government learn the right lessons for this further bout of privatisation, under whatever disguised form, of these airports and of other regional airports?