Under Hindenburg cloud, questions rise on Adani's 6 airport deals

With the controversy over the Adani Group rages across capital markets, Parliament and in public debate, the government’s decision to award busy airports to private parties for operation, maintenance and development on a 50-year lease has once again come under the spotlight.

In 2018, when the Narendra Modi government decided to offer six smaller airports under the Public Private Partnership (PPP) model by tweaking some conditions in the earlier contract used for Delhi and Mumbai airports, the Adani Group managed to bag all the six airports.

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There had been much questioning of the modus operandi of the bidding process, which resulted in Adani Group bagging all the airports project on offer at that time, but the government maintained that the process was transparent and the winning bidder had offered the maximum revenue share in each project.

AAI’s earning

Now, as questions again swirl over whether there was any wrongdoing in awarding these six airports, it is worth mentioning that the Airports Authority of India (AAI) has little to complain about in the matter. It has earned a substantial sum by awarding airport maintenance and operation contracts to private bidders.

As per answers given in Parliament during the ongoing Budget Session, the AAI is entitled to receive over Rs 3,000 crore in concession fees and upfront payment for capital expenditure from the six airports leased to the Adani Group. This is in addition to the Rs 10,674 crore the AAI has already earned in revenue share and other levies from the private developers of Delhi and Mumbai airports in five years, since these two projects were also leased out under PPP but in the UPA regime.

Leased airports

Till date, AAI has leased out eight airports in total: Delhi, Mumbai, Ahmedabad, Guwahati, Jaipur, Lucknow, Mangaluru and Thiruvananthapuram. The six airports now under the lens were handed over to the Adani Group between October 2020 and October 2021.

And as per National Monetization Pipeline (NMP), 25 more AAI airports — at Bhubaneshwar, Varanasi, Amritsar, Trichy, Indore, Raipur, Calicut, Coimbatore, Nagpur, Patna, Madurai, Surat, Ranchi, Jodhpur, Chennai, Vijayawada, Vadodara, Bhopal, Tirupati, Hubli, Imphal, Agartala, Udaipur, Dehradun and Rajahmundry — are lined up for PPP. The handover is expected to be completed by 2025 and AAI is expected to earn an additional sum of over Rs 10,000 crore from these 25 leases.

Of the 124 airports still with the AAI, not even 10 turned in a profit in 2021-22.

The earning coming in from leased airports is thus crucial for the viability of AAI, which is also tasked with investing mega capex in building airports from scratch and in doing capital works at existing airports throughout the country.

PPP under a cloud

In 2018, the Modi government decided to award six regional airports under the PPP mode to private parties. But in a departure from the earlier PPP model, this time the sole criterion was per passenger revenue share which the winning bidder would offer. The bidder offering the highest revenue share would be selected. There was another difference too — this time the government decided not to cap the number of airports a single bidder could bag, unlike in the earlier PPP exercises.

In this process, Adani Enterprises Ltd (AEL) emerged as the successful bidder for all the six airports. In doing so, AEL beat back competition from well-heeled domestic airport operators like the GMR Group and also international airport operators and other infrastructure majors. It offered maximum per passenger revenue share at all six airports.

For Thiruvanathapuram airport, the Adani Group offered more than double the per passenger fee proposed by another private airport operator besides also beating the Kerala government’s offer by nearly 19 per cent. For the Mangaluru airport bid, the group offered six times the offer of the lowest bidder; for Ahmedabad, the Adanis offered more than 10 times the lowest bidder; and, so on.

Monopoly concerns

Murmurs over monopoly and allegations over the ‘privatisation’ process for these six small airports had not even died down when news came about the Adani Group acquiring controlling stake in what was once the country’s busiest airport (before being overtaken by Delhi) – Mumbai International Airport.

MIAL is surely a jewel in the crown for Adani Group since it handles more than 45 million passengers per year. While the six airports that the Adani Group bagged earlier accounted for nearly 10 per cent of the country’s air traffic, with MIAL in its kitty, the Adani now handled nearly every fourth passenger at an Indian airport. This has made the Adani Group the largest airport operator in the country after the AAI. In this scenario, it was but natural that there were increasing concerns over monopoly. Specially since there was talk that MIAL’s acquisition would also mean that Adani Group would operate the proposed Navi Mumbai airport in future.

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According to documents available with the Airports Authority Employees Union (though these have not been independently verified) at the time the project was awarded, a cap on the number of airports a single bidder could bag was indeed proposed by the Department of Economic Affairs (DEA) before the bidding started.

DEA proposal ignored

In an appraisal note, the DEA (Ministry of Finance) had proposed in December 2018 that not more than two airports be awarded to a single bidder. Under the heading ‘Bid parameter’, the DEA had said, “these six airports are highly capital-intensive projects, hence it is suggested to incorporate the clause that not more than two airports will be awarded to the same bidder, duly factoring in the high financial risk and performance issues. Awarding them to different companies would also facilitate yardstick competition. In the case of project failure, there would be capable bidders available.”

The DEA had gone on to say that in the case of Delhi and Mumbai airports, though the GMR Group was the only qualified bidder originally, both the airports were not given to the same company. “In the case of Delhi power distribution privatisation, the city was carved into three zones and given to two companies. Therefore, it is suggested to incorporate the clause that not more than two airports will be awarded to the same bidder”.