India Needs USD 50 Billion Investment To Build Airport Assets: KPMG Report
India needs an estimated USD 50 billion in building airport assets over the next two decades to cater to demand, with the next five years expected to see significant investments in the airports sector, according to a report. By 2027, the number of domestic passengers is estimated to be around 500 million while the number of international passengers is expected to swell to 200 million by that time, according to a KPMG report on India’s infrastructure sector.
Currently, there are 108 operational airports in the country, including 21 AAI run international airports, seven international airports in joint ventures and one private state government-run international airport. The country also has 10 custom airports, 58 domestic airports and another 11 private/state government-run domestic airports, according to the AAI website.
“India needs over USD 50 billion in building assets to cater to the estimated demand over the next two decades. Our immediate need over the next five years is estimated to be USD 20 billion. Much of that investment will need to come from the private sector,” the report, titled ‘Catalysing the National Infrastructure Pipeline- Project India’, said.
Private interest in developing large commercially viable assets has also allowed the government to focus on financing regional airport infrastructure with the intent of expanding regional air connectivity and supporting traffic growth at hub airports, it said.
Last week, the government green-signalled the leasing out of three airports – Jaipur, Guwahati and Thiruvananthapuram – through public-private partnership (PPP).
So far, 12 airports have been cleared this year for privatisation — Lucknow, Ahmedabad, Jaipur, Mangalore, Thiruvananthapuram, Guwahati, Amritsar, Varanasi, Bhubaneshwar, Indore, Raipur and Trichy.
The 2020 Union Budget has proposed the development of 100 new airports under the Ude Desh Ka Aam Nagrik (UDAN) scheme in addition to the already existing ones under the initiative.
According to the report, as per the National Infrastructure Policy (NIP) 2020, which envisages 68 various projects entailing a capital expenditure (capex) of USD 19.1 billion over five years, more than half of the 50 busiest airports in the country are operating over capacity since 2018.
Also, as per the ‘Infrastructure Vision 2025’ document, as many as 30-35 AAI run airports are to be awarded for concession, it stated.
The Infrastructure Vision 2025 is the cornerstone of India’s infrastructure policy and is principally meant to improve the ease of living in India. To streamline project implementation and facilitate investments, the government has integrated various infrastructure projects under the programme. To achieve the programme’s goals, the government has also announced NIP projects worth USD 1.5 trillion over 2020-25.
Stating that aviation is one of the worst-hit sectors globally because of COVID19, the KPMG report noted that airport and airline businesses in India are expected to lose more than half of their toplines (revenues) in 2020-21.
“But, the silver lining is India’s strong domestic market, which has already seen a steady increase in air traffic on many routes since resumption of air services. However, returning to pre-COVID-19 traffic levels may take 18-24 months,” it said.
According to the report, corporate travel may continue to remain muted for some more time even as the world recovers from the pandemic as businesses will need to rationalise costs to recover losses and save jobs.
However, the leisure travel is expected to be bounce back faster, with opening up of international traffic on select corridors in phases (under various air bubble agreements) which will see a further upswing in the next 12-18 months, the report stated.
“There are several reasons to be optimistic about India’s ability to become the second largest or possibly the largest aviation market in the world in the next two decades notwithstanding the short-term impacts of COVID-19,” the report said.
It added that the reasons include low air traffic penetration, growing per capita incomes, increasing global mobility of the middle class and higher propensity for leisure and business travel facilitated by global growth in trade and commerce