State wants stake in exchange for providing land

CHENNAI: Airport development projects in Tamil Nadu have run into rough weather with the state government declining to give any more free land to the Airports Authority of India (AAI), citing rising land acquisition costs.

Instead, the TN government has proposed turning some of the airports into corporations in which it could take a stake in exchange for providing land. AAI is currently experiencing a drop in air traffic due to the economic slowdown. The slump coupled with privatisation of high revenue-yielding airports at Delhi and Mumbai have eroded the finances of the agency, which depends on fees levied on airlines for its revenue.

Its plans to expand hubs at Coimbatore, Madurai and Tiruchi hinge on acquiring land without incurring high costs. However, in a recent meeting, the state government made it clear to AAI that it would not get land for airport expansion projects free of cost.

"The government has told us that land can be provided free only for the expansion of Chennai airport. It also wants us to prune the requirement of land," said a senior AAI official.

This would impact development work, he said, adding AAI needs close to 900 acres for expanding Coimbatore airport and 616 acres for developing Madurai airport. Sources said the government has suggested that AAI convert each airport into a company and allow them to acquire stakes in it depending on the quantum of land handed over for development. But AAI is against the proposal. State governments have 13% equity share in new airports at Hyderabad and Bangalore. "

The Tamil Nadu government wants AAI to have a similar arrangement for airports in the state without privatising them," an AAI official said. The current stand-off may force AAI to reconsider its options as the agency cannot afford to acquire land on its own. "We lost high revenue-yielding airports of Mumbai and Delhi to private companies.

They paid just an upfront license fee of Rs 150 crore for airports that contributed close to Rs 700 crore from cargo movement alone to the coffers of AAI every year," said a senior AAI official. AAI already has two major projects modernization and expansion of Chennai (Rs 2,000 crore) and Kolkata (Rs 1,800 crore) airports on hand. "These projects will empty out the Rs 3,000 crore cash reserve the AAI has.

The authority is facing a severe cash crunch because decline in air traffic and unpaid air traffic fee by airlines has eaten into the revenue generated by existing airports including Chennai and Kolkata," said an executive director of AAI. "We have had a line-up of airport expansion proposals because air traffic was growing at a healthy 15%.

But now, there is a shocking decline of 20%. This is expected to slow down infrastructure developments," he added.

http://timesofindia.indiatimes.com/Chennai/Airport_projects_in_limbo_TN_wants_stakes_in_exchange_for_providing_land/articleshow/3891934.cms