Airport Privatization in India:Lessons from the Bidding Process in Delhi and Mumbai

Abstract

Modernization of Delhi and Mumbai airports had been considered as early as 1996 by the Airports Authority of India (AAI). In June 2003, the AAI board approved a modernization proposal. These airports accounted for 47% of the passenger traffic, 58% of cargo traffic and 38% of aircraft movement in 2003-04. They generated one third of all revenues earned by the AAI. Both Delhi and Mumbai airports handled twice as many aircraft movements as they were originally designed for, resulting in congestion for both aircrafts and passengers.

The bidding process began in May 2004 with an original completion date of September 2004. However, due to a variety of reasons, the process got delayed and the bids were finally received by September 2005. The evaluation process of the bids was questioned at various levels. There were many reviews of this with inputs from experts. The final decision was made in January 2006 by the Empowered Group of Ministers (EGoM) after compromising on some of its own set parameters for one of the airports. One of the losing bidders called this an arbitrary decision making process and challenged the decision in court. After two stages of legal battle, the bidder finally lost the case in November 2006 and the original awardees retained their position. Work is now progressing at these airports.

This paper focuses on the bidding process and brings out the lessons learnt.