India is accelerating its privatization drive in the airport sector to meet the demands of its rapidly growing air travel market. The government aims to privatize 11 more airports by the end of fiscal year 2025-26, as part of a broader strategy to monetize state-owned assets and reduce its fiscal deficit. This move marks the third phase of airport privatization in the country, building upon the experiences and lessons learned from previous rounds.
The decision to expedite airport privatization is rooted in the exponential growth of India's aviation sector. India's domestic aviation market is the third largest in the world after the United States and China and, according to experts, will increase passenger traffic to 300 million passengers per year by 2030. With increasing industrialization, an expanding economy, and a growing movement of people and freight, the demand for air travel is propelling the aviation sector to greater heights. The government is targeting 350 to 400 functioning airports by 2047. To cater to this surge in demand, the government recognizes the need for significant investments in airport infrastructure, modernization, and enhanced operational efficiency.
Under the National Monetisation Pipeline, the government has identified 25 airports operated by the Airports Authority of India (AAI) for leasing between 2022 and 2025. The current privatization plan involves bundling less profitable airports with commercially viable ones to make them more attractive to potential investors. This approach ensures that private entities taking over airport operations also contribute to the development and upkeep of less lucrative but essential regional airports. For instance, the high-traffic Varanasi airport will be bundled with the less popular Gaya and Kushinagar airports. Similarly, Bhubaneswar and Amritsar airports will be paired with Hubli and Kangra, while Raipur and Trichy will be linked with Aurangabad and Tirupati, respectively.
The privatization of these 11 airports is part of a larger objective to raise ₹47,000 crore through asset monetization in FY 2025-26. The government is seeking alternative revenue sources to manage its fiscal deficit, targeting a reduction to 4.4% of GDP. By offloading state assets, the government aims to reduce its budgetary shortfall.
Several major players in the airport operations and infrastructure development sectors are expected to participate in the bidding process. Adani Airport Holdings Ltd, India's largest private airport operator, is anticipated to be a strong contender. The Adani Group acquired 6 airports in the second phase of privatization and also took over GVK's stake in Mumbai International Airport. GMR Airports Ltd, which currently operates New Delhi's Indira Gandhi International Airport, is another potential bidder.
However, the privatization plan is not without controversy. Delhi International Airport Limited (DIAL) has filed a petition with the Delhi High Court, challenging the government's decision to permit commercial flights from Ghaziabad's Hindon Airbase.
Despite such challenges, the government remains committed to its airport privatization plans, believing they will help modernize the aviation sector, attract much-needed investments, and reduce the fiscal deficit. The divestment process for these 11 airports will move forward, with AAI expected to finalize the plan and seek government approval within the next month.
The government's privatization strategy is designed to attract private capital to improve airport operations, efficiency, and customer service. The bidding process will focus on transparency, with bidders expected to offer the highest revenue-sharing proposals with the AAI, ensuring fair compensation for public assets.
