Last week, Delhi took another step towards becoming a world-class city when a consortium of GMR Infrastructure, Fraport and the Airports Authority of India unveiled a giant hall through which 34 million people will fly into and out of the city every a year. In another 16 years, Delhi International Airport Pvt Ltd plans to upgrade the capital’s airport to be able to carry 100 million passengers annually. At Rs 12,700 crore, the Delhi airport’s Terminal 3 has not come cheap, but it is not horribly over budget either. And with a tolerable three-month delay in commissioning, the mega-structure stands out as a beacon for infrastructure projects in the country where time over-runs are endemic and, sometimes, soul-destroying. Even more edifying is the fact that the design and engineering prowess needed to build these modern-day cathedrals is available at home: Larsen & Toubro is the contractor for both the Mumbai and Delhi airport upgrades. Finally, public-private partnership has delivered one of India’s largest and incredibly complex infrastructure projects — the road ahead is pretty clear.
The learning process hasn’t been smooth though. Unlike the giant foreign airports that draw the bulk of their income from non-aeronautical services like retailing and hospitality, the Indian ones depend overly on navigation and landing charges, which the International Air Transport Association (IATA) estimates are a fifth higher than the international norm. The tepid response of the subsidiary businesses that spring up when aviation hubs of this size are created has forced Indian developers to ask fliers to pay for upgrades even before they use the enhanced airport services. The government and the courts have weighed in for the concessionaires when they sought to frontload airport development fees, a practice frowned upon by the IATA. Inimical global credit market conditions could be touted as a reason in this case, but it should not set a precedent.
Idiosyncrasies of the Indian market apart, some lessons emerge for the regulation of aviation in the country as well. Capacity use projections ought not to be in dispute three years after they were first made. Calls for a new airport near Delhi have surfaced using projections of passenger traffic growth at the existing one that are dramatically higher than those made by the GMR-led consortium. Although the airports upgrade policy incorporates a right of refusal for the concessionaire, any perceived need for a new airport less than a decade after the first one has been expanded shows up regulatory due diligence in poor light.