ICRA highlights capacity constraints at Indian Airports

New Delhi [India], Mar. 9 (ANI): As per credit rating agency ICRA, the air traffic estimates by FY2022 are expected to exceed by 450 million passengers, which means that the country would need to double its existing capacity over the next five years, capital expenditure estimated to the tune of Rs. 1.4 lakh crore over the next five years as against the estimated capex of Rs. 52,000 crore undertaken in the past 10 years.

Over the last 10 years, around 32 percent of the total capex has been undertaken by AAI while the rest has been undertaken by the private players. Going forward too, given the sizeable scale of capex required, private players would have to make the major contribution. However, after the initial burst of privatisation over 2004-06 when Bengaluru, Delhi, Hyderabad and Mumbai airports were privatised, the airport privatisation in the country has been sluggish.

In the past, execution challenges like approvals, land acquisition; regulatory uncertainty primarily pertaining to fixation of aeronautical tariffs; market risks around Greenfield airports or second airports etc. have dampened the private sector's interest. This was highlighted by the limited bidding for the Navi Mumbai airport recently.

"The annual capacity (terminal building capacity) of the operational airports in India is estimated at 270-290 million passengers. Against this, the total passenger traffic for FY2017 is estimated to be around 265 million, translating into capacity utilisation of more than 90%. While the situation varies across the airports, the larger or busier airports face acute capacity constraints, with some of them operating above full capacity. This highlights the urgent need for capacity enhancement at most of the airports in the country," said Harsh Jagnani, VP and Sector Head - Corporate Ratings, ICRA Limited.

Since FY2014, aviation traffic in the country has been on a strong upward trajectory - for both the passenger as well as the aircraft traffic categories. During FY2016, the passenger traffic in the country crossed 220 million. While, the Airports Authority of India (AAI) has been looking to upgrade the infrastructure and increase the capacity at the airports around the country, the growth in aviation traffic has outpaced the increase in infrastructure capacity.

In order to expand the airport capacity in the country, the Government of India has initiated many steps in the last one year. These include the National Civil Aviation Plan 2016 (NCAP 2016), Regional Connectivity Scheme (RCS), and proposals in the Union Budget 2017-18. While all these are steps in the right direction, their timely execution would be critical. Also, the execution of these plans would require greater policy clarity on many issues, primarily where private participation is required.

The use of Hybrid Till is expected to incentivise the private developers and operators to participate in the aviation infrastructure development. However, this results in higher airport tariffs, which are ultimately recovered from passengers. (ANI)