After a big bang boost to privatization in the budget, the financial markets in February 2021 saw a kind of bull run on steroids clocking new lifetime highs every other day. GST collections too soared to new all-time highs of more than Rs.1.1 Lakh crores per month after a period of slumber in 2020. Overall, an atmosphere of euphoria and exuberance was sprouting on all counters. The general consensus is that the Indian economy is out of the woods, back on the runway track, gaining pace, and is about to take off to a double-digit growth under PM Modi’s leadership.
Indeed, PM Modi and his team did a commendable job handling the pandemic, confronting national security threats at the border, bringing in a series of structural reforms, and reviving the economy by kickstarting privatization. So much is happening on the strategic front daily that only after a few years down the line can we see a tangible impact. Such action-packed performance by team Modi is helping Modi gain immense political capital. No other opponent is simply able to play even catch up. But how many successes he may ever fare to his account, there is one crucial aspect that will make or break his legacy.
There is a firm belief that no corruption at the higher levels is possible in the Modi government. Whether from BJP or not, many people firmly believe that PM Modi is not corrupt and Modi will not tolerate corruption in his government. ‘ना खाऊंगा ना खाने दूंगा’ ‘Na khaunga, na khane dunga’ was one of his clarion slogans that got him to the Prime Ministership. That popular sentiment inspired a whole lot of the young generation and boosted investor confidence, and enabled a level playing field in his governance. Many MNCs too felt comfortable doing business with India because of the certainty of government policies and transparent decision-making from the top. This goodwill ultimately paved the way for a robust growing economy while garnering the much-needed support to usher in more structural reforms as well.
It is justifiable and understandable that “There is no business for the Government to be in Business”. This principled stand of Modi government is a welcome step for obvious reasons that the private sector through Public-Private Partnership (PPP) brings efficiency in service delivery, expertise, enterprise, and professionalism apart from harnessing necessary investments and fostering competition. But in the blind rush for privatization, many grave irregularities at that higher up levels in PM Modi government are being brushed under the carpet. PM Modi may or may not be aware of such irregularities and may not personally approve of them. But the coterie around him may be putting him in the dark and are personally milking the privatization ride under the garb of nation-building. Modis’ response to one such issue of privatization will be his own testimony to his legacy and a litmus test of his integrity.
The Indian Aviation sector, which has seen successful privatization and monetization of airport infrastructure in the past, has witnessed grave irregularities and improprieties at the higher up levels lately. To give a brief about the sector, in 2018, India was the fastest-growing domestic air travel market globally, with more people flying within the Country than the previous year. India’s domestic market recorded the fastest full-year growth rate for the 4th year in a row (18.60%). Going by statistics, it is expected that 600 million people would be flying from Indian Airports by 2023, and the number will grow well beyond 1 billion by 2030. Such vibrant is the Indian aviation sector.
The Airports Authority of India (a Miniratna, 100% government-owned Statutory Corporation) has already successfully championed the privatization and monetization of several airports to advance the Country’s aviation infrastructure. AAI started its privatization bid in 2005 when it gave away prized Mumbai and Delhi airports on a Private-Public partnership basis for upgradation, management, and operation on a revenue share basis.
Thanks to such revenue sharing PPP model adopted then, AAI now owns a 26% stake in Delhi International Airport Limited (DIAL), 26% in Mumbai International Airport Limited (MIAL), 13% stake in GMR Hyderabad International Airport (HIAL), 13% in Bangalore International Airport (BIAL), 51% in Chandigarh International Airport (CHIAL). AAI received a whopping Rs. 4,900 crore revenue from airport lease and non-aeronautical services alone for the FY 2018-19. The Profit after Tax (PAT) stands at Rs.2,271 crore. The long-term borrowings were Rs.37 crores. AAI had contributed Rs.540 crore and Rs.810 crore to Airport Development Reserve and General Reserve from its surplus profits.
On the operational front too, AAI has received the best performance award in electronic tendering among PSUs. Further, Airport Service Quality (ASQ) – a world-renowned global benchmarking programme awarded several Indian airports for outperforming their peers. For example, Ahmedabad Airport has won Annual ASQ awards for 2017 for three categories: Best Airport by Environment & Ambiance, Best Customer Service, and Best Infrastructure and Facilitation under 5-15 million passage size categories. The overall bottom line is that AAI is robust, efficient in the privatization and motorization of its assets. AAI is better positioned to take part in the sector’s upside growth through its revenue-sharing PPP model.
But, the recent privatization of six airports by AAI is marred with a lot of bidding irregularities and strange irrationalities. Many parallels can be drawn with Coalgate and 2G Spectrum scams. The Cabinet Committee, Empowered Group of Secretaries (EGoS), and even the Niti Aayog have failed the nation with their unexplained silence when severe bidding irregularities were simply cooking under their nose. PM Manmohan Singh too, was heavily criticized for being mum while several scams were getting hatched just under his nose. Moreover, news networks and media have let down India’s people for their lack of interest to do thorough investigative journalism in this shady episode.
The average share price of Adani was quoting about Rs.150-200 during most of 2019/2020. Most media networks were busy cheerleading Adani group for having reached Rs.1 Lakh crore market capitalization in March 2021 when the share price touched a high of Rs.920+ which has grown about six times, completely cascading its Karnataka High Court Case on Airports privatization. No media or business news network could not dare to look into objective reasons for the Adani stock to appreciate multiple times within a year. The quantum leaps achieved by Adani’s share price without having a strong fundamental reason are attributable only to the massive windfall gains it about to get from the 225 acres of prime airport lands in various cities for real-estate development. Unlike Delhi and Mumbai airport privatization, Adani now doesn’t have to share any revenues from non-aeronautical revenues and city-side real estate development with the AAI.
Big corporates like Adani, whom Rahul Gandhi frequently laments as Modi’s friend, have seemingly managed to shore up this whole PPP charade so successfully, that they are cleverly positioning their bagging of six airports as their core corporate commitment to invest in the nation’s infrastructure on PM Modi’s call for rebuilding of the New India. Of course, the Covid-19 pandemic did help shush away any or some of the spotlight and public scrutiny it could have garnered otherwise.
In any case, PM Modi, his Cabinet, Empowered Group of Secretaries (EGoS), AAI, and Niti Aayog must explain to the nation how the bidding process for the six airports which Adani bagged could not have been managed better. More specifically, the following questions must be answered.
- Why PPP-based privatisation engagement is not managed without any controversies and absurdities.
- How the fair value for the six airports could have been monetized successfully to the fullest extent possible to the benefit of India’s exchequer.
- Which particular officers have sponsored the RFP and Project documents.
- Where do the loyalties of the Empowered Group of Secretaries (EGoS) lie.
- Why RFQ was disbanded despite calling for a global tender and India already having sufficient expertise in O&M. What is the harm in floating RFQ with less stringent qualification criteria if broader participation is required.
- Why dint the PPP Appraisal Committee (PPPAC) of Niti Aayog did not compute or demand financial IRR to determine a reserve price for the airports’ bidding.
- Why the widely accepted & successful project revenue sharing concept is dropped. There is no PPP if revenue sharing of city-side development is excluded from the privatization process.
- Why AAI does not want to participate in the upside of non-aeronautical business revenues and city side development revenues (facilities like hotels, restaurants, convention centers, food court, retail shops and parking etc.)
- Why the lease period of 30 years was increased to 50 years, when no one asked for it, while absolutely forgoing potential revenues without participating in the upside growth story, city-side development, revenue-sharing model etc.
Arun Jaitley, who was then finance minister, highlighting the flagship UDAN scheme, said, “Sarkar ki iss pahal se hawai chappal pehnne wale nagrik bhi hawai jahaj mein yatra kar rahe hain (With this initiative, people wearing slippers are also travelling in aircraft)”. He further added that AAI was in the best position to be leveraged to raise more resources to fund the airports’ expansion plans in India. He added AAI would be able to fund itself from the money coming from Delhi and Mumbai airports.
The international airports in the national capital and Mumbai are run through revenue sharing PPP, where AAI is a stakeholder. Of course, PM Modi too, who comes from a humble background, could have supported decisions that benefit all Indians primarily, and especially people wearing slippers without hesitation. But the sort of one-sided AAI privatization drive benefiting few corporate friends might not have seen the light of the day if Arun Jaitley could have been alive as the Finance Minister beside PM Modi.
Moreover, given the recent blunderous episode of AAI’s privatization and asset monetization, it is scary when Niti Aayog CEO says, “Only a few PSUs to remain in strategic sectors”. Nobody knows how many more such assets-rich PSUs like the AAI will be targeted, drilled, exploited, and gifted away to friendly corporates. Nobody is objecting to privatization, and everybody is for principled privatization. But blatant abuse of power to the benefit of a few powerful and loss to India’s exchequer is really worrisome. Many will start to wonder if our country and its assets are in safe hands anymore.
Thomas Hobbes once said, “Hell is truth seen too late.” Will PM Modi wake up soon to see the truth, corruption, irregularities, and misdeeds going on around him and in his government is the pertinent question to ponder upon. Hopefully, Modi will soon demand the recall of all airports won by Adani in a skewed bidding process and personally monitor all future PSU privatization drives before things go awry, get chaotic, and crony capitalism completely takes over the Country.
