Airport Privatisation Plan May Limit Bids, Finance Ministry Flags Rising Market Concentration In Aviation Sector

Mumbai: The government may limit how many airports a single private operator can win in the upcoming privatisation round after concerns were raised about growing market concentration in India’s aviation sector.

The Ministry of Civil Aviation has proposed introducing a cap for the auction of 11 airports, according to an official record of discussion made public by the government.

Finance Ministry Raises Concern

The proposal came after the Ministry of Finance highlighted the “oligopolistic nature” of the country’s aviation sector.

An oligopoly is a market where a small number of companies control a major share of the business. Together, private airport operators Adani and GMR currently handle more than half of India’s air passengers.

The proposed restriction is expected to prevent one operator from winning too many airports in the forthcoming auction.

Airports To Be Auctioned In Bundles

The 11 airports will not be offered separately. Instead, they will be auctioned in bundles containing two or three airports each.

Under this model, a major airport earning strong revenue will be paired with smaller airports that may be making losses or handling fewer passengers.

The private company winning a bundle will be responsible for operating and developing all the airports included in it.

Profitable Airports To Support Smaller Ones

Revenue generated by a busy airport can be used to meet the operating and capital expenses of smaller airports in the same package.

This cross-subsidy model is expected to make less-profitable airports more attractive to private investors while supporting their long-term development.

Cap May Control Debt Risks

The proposed cap is also aimed at preventing operators from taking on excessive debt to acquire and develop several airports at the same time.

The government is concerned that heavy borrowing by one company could create financial or operational problems across multiple airport projects if that operator faces difficulties.

Limiting the number of airport bundles awarded to one bidder could encourage wider participation, reduce market concentration and distribute financial risks among several companies.

The final bidding conditions, including the possible cap on airport ownership, are expected to shape competition in India’s next major round of airport privatisation.