Why in news?
The government’s move to raise capital by privatizing half a dozen airports through 50-year concessions might find few takers when the aviation industry is facing acute financial stress, industry experts said.
Very few serious bidders = No Fair value
- It is expected that if the government proceeds with the privatization plan, it might find only two-three serious bidders that are able to raise the required debt and equity in a liquidity-starved market, lowering the chances of fair price discovery.
- It will be difficult for buyers to do adequate due diligence during lockdown, which would particularly curtail foreign interest.
- As the more profitable public airports are going under the hammer first, the government will get less than fair value on many of them.
- Airport sale prospects might not improve till airlines can get their businesses in order.
- Indian airlines need a direct cash infusion to pay salaries for the lockdown period, subvention on airport charges, relaxation on fuel taxes and statutory dues and government-backed credit lines that can stave off bankruptcy till passenger traffic revives and they can rebuild their balance sheets.
- On 16th May 2020 the Finance Minister announced that the bid process for the six airports will start soon.
- The six airports in the second round are likely to be Amritsar, Varanasi, Bhubaneswar, Indore, Raipur and Tiruchirapalli, which are owned and operated by state-run Airports Authority of India.
- The airline industry has been grounded since 25 March due to the lockdown. Carriers are estimated to report a 44% drop in revenue this fiscal and net debt may rise to ₹46,500 crore by 2021-22.