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Tactical turbulence

THE CENTRE HAS expectedly chosen the lease route to privatise the metro operations of the Airports Authority of India (AAI). For a very simple reason, the thinking in the government circles had veered around to the lease option rather than the more logic al course of corporatising the existing structure and offering shares to private investors. Any legislative initiative in this regard might well have set the Government on a collision course with the AAI staff _ a situation it would have wanted to avoid even as it is emerging from its skirmish with employees of the publicly-owned insurance industry.

The corporatisation proposal carried with it the prospect of the Government settling for a minority stake (once the AAI gets incorporated) and eventually of even exit from the new entity. Such an arrangement would have clearly resulted in the private ent repreneur, now armed with full management control, downsizing the workforce to internationally accepted levels. After all, with a staff strength of 20,000, it does not require a crystal ball to know that there is scope for reduction in manpower without i mpairing the service quality. The AAI staff are unlikely to let the proposal go uncontested. But under the lease arrangement, the staff might be expected to be retained as supernumaries in a truncated operational structure for airports that would remain with the Government. While this may buy the Government peace with the workforce, it is not without its dysfunctional consequences for the staff rendered surplus. Clearly, the transition to a privatised arrangement is fraught with considerable uncertainty .

While the strategic compulsions for the lease route are understandable, what is not is the decision to allow the AAI full control over the lease rentals which are by no means small. The AAI's gross revenues exceed Rs. 1,500 crores and almost three-fourth s of it accrues from the four metros. Further, the AAI's annual cash accruals are around Rs. 440 crores (based on the Budget figures for 1999-2000); much of this is contributed by the four metro airports, as conceded by the Government itself. There is an element of cross-subsidisation of operations of the airports in smaller cities and towns from the revenues of the more lucrative metro facilities. There is clearly an anomalous situation. On the one hand, under the new arrangement, the investment requir ements of the major airports will be met by private entrepreneurs as lessees. On the other, the surplus cash with the AAI, and which may be enhanced by the higher lease rentals, would find no ready deployment as the potential for traffic growth at the mi nor airports may not warrant any substantial investments. The experience of the Kochi airport in the private sector is a sobering reminder of the essentially unviable nature of the minor facilities. The unutilised surplus remaining outside the scrutiny o f a Parliamentary oversight mechanism is a sure recipe for mismanagement, as the experience with the Oil Industry Development Board surpluses showed at the time of the 1992 stock market scam. The Government has clearly not made out a case for such extrao rdinary measures of book-keeping for its finances.

This is not to suggest that the country does not need to improve its civil aviation infrastructure. A well-developed infrastructure is what the country deserves to have considering its economic stature. Additionally, quality airports can become hubs for transiting passengers and for cargo, and create new impulses for economic growth. A dynamic management at attractive costs to the airlines may well bring traffic now serviced by the more nimble-footed airports in the Far East such as Singapore and Hong K ong. Private management, perhaps, is the best bet to capture this potential. But not by diluting the norms of public accountability.