Explained | Tamil Nadu’s demand for revenue sharing from privatized airports

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Chhattisgarh and Jharkhand have come out in favor of Tamil Nadu’s proposal to give states a share of the revenue whenever an airport is privatized.

Chhattisgarh and Jharkhand have come out in favor of Tamil Nadu’s proposal to give states a share of the revenue whenever an airport is privatized.

The story so far: Earlier this month, the government of Tamil Nadu issued a policy note stating that the state government should seek compensation from the Center in the event of the privatization of an airport or the transfer of its assets to a third party.

Giving their support to the DMK-led government, Chhattisgarh and Jharkhand have followed suit and claimed a share of the revenue from the privatization of airports.

Here is an overview of what the Tamil Nadu government has proposed and why Chhattisgarh and Jharkhand support the proposal which could become the latest flashpoint between the Center and the States.

Privatization of airports in India

Airport privatization in India began in 2003 after the government approved a proposal to upgrade Mumbai and Delhi into a public-private partnership (PPP) model. The United Progressive Alliance (UPA) government also proposed the privatization of a few airports, but could not implement it.

The proposal was later taken up by Prime Minister Narendra Modi. In 2019, Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram and Guwahati airports were leased through the PPP model.

In 2021, the Center unveiled its plan to further monetize 25 airports operated by the Airports Authority of India (AAI) over five years under the National Monetization Pipeline (NMP).

These included four airports in Tamil Nadu – Chennai, Coimbatore, Madurai, Tiruchirappalli (Trichy).

What does Tamil Nadu offer?

Under the NMP, the Center has earmarked four airports for privatization in Tamil Nadu. While citing a request for the state to acquire 64.57 acres of patta land for Chennai Airport, Tamil Nadu Industries Minister Thangam Thennarasu presented a policy brief to the Assembly on 19 april.

The note states: “The AAI is actively pursuing the policy of airport privatization. Hence, a decision has been made that in case the state government acquires and transfers the land to the Airports Authority of India free of charge and the Airports Authority of India or Government of India transfer the assets to a third party, the realized value/revenue thereby generated shall be shared proportionately with the State Government, reflecting the huge investment in land made by the State Government. »

The value of the land, at an appropriate stage, should be converted into shares of the state government in the airport special purpose vehicle or an appropriate revenue sharing agreement should be entered into before the airport is transferred to a private party, he adds.

The Tamil Nadu government said the political decision was taken in view of the state’s investment in the land assets prior to the handover to AAI.

Why do Chhattisgarh and Jharkhand support Tamil Nadu?

The non-BJP ruled states of Chhattisgarh and Jharkhand have also demanded a share of the revenue from privatized airports. Chhattisgarh Minister TS Singh Deo said that when the Center and the State come together for a remunerative project, government capital is present as a shareholder in terms of land.

“As long as it is in the government sector, things develop in a particular way, the Indian government would generate revenue and there would be something that would trickle down to the state government and there would be a benefit for the public, so that’s good,” the Minister said, and added, “Now when you sell it to a third party entity that is a private party, you are selling the assets of the business, which include, besides the infrastructure, the land as well.So the state government should receive the value of the land.

He noted that the sale will be through an appraisal of the entire property which will include the sale price of the land.

“When you are in a joint venture, the investment that has been made, the Indian government would invest capital in terms of infrastructure, the state government would bring in their capital in terms of land. So in any such venture, the value of the land should be given to the state government if and when it is sold to a third party who is a private actor,” the Minister added.

Jharkhand’s finance minister, Rameshwar Oraon, also backed the proposal. “The land belongs to the state. When it is under the central government, we have no problems, we give land, water and other resources. But if the Center outsources it to private parties, the revenue should be shared with the state government. A policy should be developed in this regard for all states, not just Jharkhand,” Mr. Oraon said.

Did the Center accept the request?

The Ministry of Civil Aviation has yet to officially comment on the matter. Officials reportedly said in a news agency report that a decision on the matter would be taken at higher levels of government.

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