Government Eyes Expanded Commercial Use of Airports in New Privatisation Push
The Indian government is considering a significant shift in its approach to airport privatisation, with the introduction of a proposal that would allow private airport operators to develop shopping complexes, conference centres, and commercial offices on airport land. This marks a broader move away from the traditional focus on hotels and cargo warehouses, as the government seeks to unlock the full commercial potential of airports in both Tier I and Tier II cities.
The Airports Authority of India (AAI) Act, 1994, which currently governs the development and use of airport land, restricts the scope of commercial activities at airports. Under the existing law, airport land is mainly reserved for facilities related to aviation, such as hotels, restaurants, restrooms, warehouses, and cargo complexes. However, the proposed amendments aim to broaden this scope, enabling private operators to engage in a range of commercial activities, from retail spaces and office complexes to conference facilities. This change would be particularly beneficial for airports in urban areas where excess land offers untapped opportunities for development. This move is expected to significantly impact the privatisation of airports, particularly in smaller cities. The government has already begun consultations with various ministries and stakeholders regarding the proposed amendments to the AAI Act. Once the consultations are complete, a bill will be introduced in Parliament, although it remains unclear whether the changes will apply to airports that are already privatised. Notably, 11 airports in cities such as Varanasi, Bhubaneswar, Raipur, and Amritsar are set to be offered for privatisation as part of this new push.
Experts in the aviation sector believe that removing the restrictions on land use will make these airports more attractive to private operators, thereby increasing the potential value of the assets. According to Sidharath Kapur, a seasoned airport executive with experience at both GMR and Adani Airports, the ability to develop a wider range of commercial facilities will boost the competitiveness of these airports in the global market. “Many of these airports are located close to urban centres and have excess land that is ripe for commercial development. This step will also encourage the creation of vibrant ‘aerocity’ developments, which can improve bid values for privatisation,” said Kapur.
The move is also in line with the government’s asset monetisation strategy, which aims to raise ₹20,782 crore by privatising 25 airports over the next four years. The privatisation of airports, especially in Tier II cities, is seen as a key component of India’s broader economic development plans. These airports are expected to become hubs of economic activity, stimulating both local and national growth through enhanced infrastructure and connectivity. This is the second time the government has attempted to amend the AAI Act. A similar effort in 2017 was met with legal opposition from the GMR Group, which operates the Delhi International Airport, as the proposed changes only applied to existing public-private partnerships, excluding major airports like Delhi and Mumbai. The new proposal, however, seeks to eliminate such restrictions and create a more flexible framework for land use at all airports under privatisation.
As the government pushes forward with its plans, industry experts are keenly watching how the proposed amendments could reshape the landscape of India’s aviation and real estate sectors. The outcome will likely have lasting implications not only for the privatisation of airports but also for the future of urban development around India’s busiest transportation hubs.
