Public private partnership in airport development- Governance and risk management implications from Cochin International Airport Ltd.

Abstract

In India, airports were totally owned and managed by central government or the armed forces. The Airport Authority of India (AAI), a body functioning under the Ministry of Civil Aviation was responsible for managing the airports in India. In 2000, there were 117 usable airports (including 26 civilian enclaves maintained by the military) in India, which according to ICAO (International Civil Aviation Organisation) was more than China, which had 76 airports. Out of these, scheduled commercial operations were made only to 61 airports. According to projections, Indian air passenger traffic was estimated to grow to 100 million passengers by 2012 from 36.98 million in 1998-99. Growth projections in the cargo front were also promising. The draft policy on Airport Infrastructure of December 1997 acknowledged the importance of developing airport infrastructure in the country. Airport infrastructure was linked to development of India's international competitiveness and her ability to attract foreign investments. The policy opened the doors of private investment in this sector, including investments from foreign airport authorities. Cochin International Airport Limited (CIAL) was the first airport in India to be built in the joint sector with public - private participation. The airport users and other benefactors, mainly non-resident Indians, the general public, government of Kerala (GOK) and the airport service providers came together to build an airport of international standards. The new Cochin airport project was an alternative to the existing civil enclave in the naval airport, which was not capable of handling larger aircraft due to runway limitations. The development of this airport took place initially irrespective of the policy on airport infrastructure. Some of the parameters of this policy evolved as a result of CIAL. The cost of expanding the existing airport was almost equal to the cost of constructing a new airport. Further, it was considered near to impossible to obtain budgetary support form Government of India (GOI) for expanding the existing airport. The involvement of users was a pioneering concept of this project, which was conceived even while a definite policy on private participation in airport infrastructure was not in place. The process of project and financial structuring, project management including land acquisition and resource mobilization, dealing with regulatory bodies and managing early operations in the context of CIAL offers a rich learning experience for governance in developing successful infrastructure projects. This paper begins with the case study of CIAL, from which implications for governance and risk management are examined. The significant governance issues are land acquisition, rehabilitation and resettlement of project affected people, project development ensuring viability of airports and staffing. The key areas of risk management are political risk, revenue risk, operating risk and regulatory risk.