Privatization of Delhi & Mumbai Airports - A Bumpy Take Off

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Case Details:

Case Code : ECON016
Case Length : 21 Pages
Period : 2003-06
Pub Date : 2006
Teaching Note : Available
Organization : Airport Authority of India, Ministry of Civil Aviation
Industry : Civil Aviation
Countries : India

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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.

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"Aviation has only been treated as a glamour industry; it has never been treated as something which is core to infrastructure and development of the country."¹

- Praful Patel, Union Minister of Civil Aviation, Government of India, on the need for Airport upgradation, in February 2005.

"To our utter shock and surprise, substantial changes to the published tender conditions have been telephonically communicated, in strange circumstances, barely two hours before opening of financial bids. These changes are a complete departure from the tender conditions and are untenable."²

- A Reliance Spokesperson immediately after Announcement of
Delhi and Mumbai Airport Privatization Bid Results in January 2006.

"We're going to intensify our agitation until the government relents. It is the question of the lives of thousands of airport employees and their families."³

- Nitin Jadhav, General Secretary, Airports Authority of India Employees Union in February 2006 on the second day of the employee strike against Airport Privatization.

Introduction

In February 2006, Reliance Airport Developers Private Ltd.⁴ (Reliance) filed a petition in the Delhi High court challenging the results of the bidding process for the privatization of the Delhi and Mumbai Airports. The plea contested the 'arbitrary and illegal' way in which the Government of India (GoI) had awarded the bids.

With this development, the GoI's hope that the long drawn out process of privatization of Delhi and Mumbai airports was reaching a fruitful end, received another jolt.

The privatization of the two premier airports of India had been postponed repeatedly since 1997.

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Successive governments sought to initiate the process by bringing in the required changes in airport infrastructure policy, but the process was always hindered by roadblocks.

In May 2004, the Congress (I) led-UPA⁵ government came to power and commenced the process of privatization of the Mumbai and Delhi airports by inviting bids from interested parties. It was delayed until September 2005. Then again, the bidding process became controversial. While some players left the fray because of certain bid conditions, others were rejected by the evaluators. The bid results that were announced in December 2005 led to public outcry and dissatisfaction. Allegations of lack of transparency and apparent favoritism were made. Subsequently, the GoI appointed several committees to lend credibility to the much maligned process.

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1] "On the Record," www.indianexpress.com, February 15, 2005.

2] "Shocked Reliance Says Changes in Airport Bids Untenable," www.outlookindia.com, January 31, 2006.

3] "Police Take Over Airports as Strike Bites," www.yahoo.news.com, February 2, 2006

4] Reliance Airport Developers Private Ltd. is part of the Anil Dhirubhai Ambani Enterprises (ADAE) group headed by the prominent business tycoon Anil Ambani.

5] United Progressive Alliance (UPA) - a coalition of several regional parties, the Left Front (four parties) and led by the Congress (I).