Airport projects on hold as state refuses free land

V Ayyappan TNN

Dec 26, 2008

Chennai: Airport development projects in Tamil Nadu have run into rough weather with the state declining to give any more free land to the Airports Authority of India (AAI), citing rising land acquisition costs. Instead, the government has proposed turning some airports into corporations in which it could take a stake in exchange for providing land. AAI is currently experiencing a drop in air traffic due to the economic slowdown. The slump coupled with privatisation of high revenue-yielding airports at Delhi and Mumbai have eroded the finances of the agency, which depends on fees levied on airlines for its revenue. Plans to expand hubs at Coimbatore, Madurai and Tiruchi hinge on acquiring land at lower costs. However, in a recent meeting, the state government made it clear to AAI that it would not get land for airport expansion projects free of cost. “The government has told us that land can be provided free only for the expansion of Chennai airport. It also wants us to prune the requirement of land,” said a senior AAI official.

AAI can’t afford to acquire land on its own

Chennai: The Tamil Nadu government’s refusal to give more free land to the Airports Authority of India (AAI) would impact development work, a senior AAI official said, adding that the AAI needs close to 900 acres for expanding the Coimbatore airport and 616 acres for developing the Madurai airport. Sources said the government has suggested that AAI convert each airport into a company and allow them to acquire stakes in it depending on the quantum of land handed over for development. But AAI is against the proposal. State governments have 13% share in new airports at Hyderabad and Bangalore. “The government wants the AAI to have a similar arrangement for airports in the state,” an AAI official said. The stand-off may force AAI to reconsider its options as it cannot afford to acquire land on its own. “We lost high revenue-yielding airports of Mumbai and Delhi to private companies. They paid an licence fee of just Rs 150 crore for airports that generated nearly Rs 700 crore from cargo movement alone,” said an AAI official. AAI already has two major projects — modernization and expansion of Chennai (Rs 2,000 crore) and Kolkata (Rs 1,800 crore) airports — on hand. “These projects will empty out AAI’s Rs 3,000 crore cash reserve. The agency is facing a cash crunch because decline in air traffic and unpaid air traffic fee has eaten into the revenue generated by existing airports,” said an executive director of AAI.