Privatized Airports: Chhattisgarh and Jharkhand support TN with revenue sharing

Amid the deepening spat between center and state over economic issues, a move by the DMK government in Tamil Nadu, revenue-sharing from privatized airports and equity against land provided by the state for the construction of new airports, is found in others ruled by the opposition States to find favor. Congress-ruled Chhattisgarh and the JMM-led government in Jharkhand have now backed the Tamil Nadu proposal.

The center has not officially commented on the states’ plans, but officials at the center have signaled they are unwilling to comply with the states’ request, saying it could potentially hurt “privatization sentiment.”

Tamil Nadu’s proposal is included in its new industrial policy. “It’s very logical. If you give it (land) to a Government of India company, you become a partner and that is your asset. If that asset is transferred to another party, and especially if that party is a private party, only one partner can receive the share,” TS Singh Deo, Minister for Panchayat and Rural Development, Health and Family Welfare and Business Tax in Chhattisgarh, told The Indian Express.

“The state government is also a stakeholder and should get its share depending on the capital made available at the time this project was launched. That’s absolutely the way things should be,” he said.

Speaking to The Indian Express, Jharkhand Finance Minister Rameshwar Oraon said: “The land belongs to the state and the activities also take place in the state…so in such a situation, if we get the revenue share, our revenue will increase. We will support such a demand. All the land belongs to the government, it belongs to the state, we gave it to the government…they should share the revenue with the state government if it’s privatized.”

However, the Center believes that whenever a new or upgraded airport is built, the state derives economic benefits from the infrastructure.

“One of them is direct economic activity, which benefits the entire state. Even within the region where the airport is being developed, there are catchment areas that are reaping benefits that will benefit the country. Land value will be increased leading to better collections of stamp duty etc,” a senior official working closely on the center’s privatization plans told The Indian Express.

“If such demands for private companies result in creating an additional outlet on top of what they share with the AAI, it reduces the attractiveness of the project,” the official said.

The AAI, Department of Civil Aviation and Niti Aayog did not respond to inquiries from The Indian Express.

According to the National Monetization Pipeline, 25 Airports Authority of India (AAI) airports are earmarked for asset monetization by 2025: Bhubaneshwar, Varanasi, Amritsar, Trichy, Indore, Raipur, Kozhikode, Coimbatore, Nagpur, Patna, Madurai, Surat, Ranchi , Jodhpur, Chennai, Vijayawada, Vadodara, Bhopal, Tirupati, Hubli, Imphal, Agartala, Udaipur, Dehradun and Rajahmundry.

The center has privatized six airports so far, with Ahmedabad, Lucknow, Guwahati, Thiruvananthapuram, Jaipur and Mangaluru leased to Adani Enterprises for 50 years.

Typically, state governments purchase land and transfer it to AAI under a 99-year lease for a sum of Re 1 when a new airport is built or an existing airport is expanded by AAI. The land will be acquired, cleared and then transferred to AAI.

In its new industrial policy published last week, the Government of Tamil Nadu stated: “In the current projects, the land cost constitutes the major part of the total project cost. The Airports Authority of India (AAI) is actively pursuing the policy of airport privatization. Therefore, a decision has been made that in the event that the State Government acquires the land free of charge and transfers it to AAI and AAI or the Government of India transfers the assets to a third party, the realized value/income accrued thereby must be proportional to the state government, reflecting the huge investment in land being made by the state government.”

The policy states: “It has also been decided that, in due course, it must be ensured that the value of the land is converted into state government equity in the airport project’s special purpose vehicle or an appropriate pro rata sharing arrangement of the proceeds to the investment is determined.” , before any transfer of assets to a private party takes place.”

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