Explained | Why is Tamil Nadu seeking revenue share in privatised airports

Chhattisgarh and Jharkhand have come out in support of Tamil Nadu’s proposal to give States a share of revenue whenever an airport is privatised.

April 28, 2022 11:11 am | Updated 03:53 pm IST

The Centre has shortlisted four airports in Tamil Nadu for asset monetisation over FY 2022-2025.

The Centre has shortlisted four airports in Tamil Nadu for asset monetisation over FY 2022-2025. | Photo Credit: VELANKANNI RAJ B

The story so far: Earlier this month, the Tamil Nadu government issued a policy note which stated that the State government should claim compensation from the Centre in case of privatisation of an airport or transfer of its assets to a third party.

Coming out in support of the DMK-led government, Chhattisgarh and Jharkhand followed suit and claimed a stake in revenue share from the privatisation of airports.

Here is a look at what the Tamil Nadu government has proposed and why Chhattisgarh and Jharkhand are backing the proposal which could emerge as the latest flashpoint between the Centre and States.

Privatisation of airports in India

Privatisation of airports in India first began in 2003 after the government approved a proposal to upgrade Mumbai and Delhi in a public-private partnership (PPP) model. The United Progressive Alliance (UPA) government also proposed the privatisation of a few airports, but couldn’t implement it. 

The proposal was then taken up by PM Narendra Modi. In 2019, Lucknow, Ahmedabad, Jaipur, Mangaluru, Thiruvananthapuram, and Guwahati airports were leased through the PPP model. 

In 2021, the Centre unveiled its plan to further monetise 25 airports managed by the Airports Authority of India (AAI) over five years under the National Monetisation Pipeline (NMP). 

These included four airports in Tamil Nadu – Chennai, Coimbatore, Madurai, Tiruchirappalli (Trichy). 

What is Tamil Nadu proposing?

Under NMP, the Centre has earmarked four airports for privatisation in Tamil Nadu. As he cited a request to the State to acquire 64.57 acres of patta land for Chennai airport, Tamil Nadu Industries Minister Thangam Thennarasu presented a policy note in the Assembly on April 19.

The note states: “The AAI is actively pursuing the policy of privatisation of airports. Therefore, a decision has been taken that in the event the state government acquires and transfers the lands to the Airports Authority of India free of cost and the Airports Authority of India or the Government of India transfer the assets to a third party, the value realised/revenue accrued thereby, must be proportionately shared with the State government reflecting the huge investment in land being made by the State government.”

The value of land, at an appropriate stage, should be converted into equity of the State government in the airport’s special purpose vehicle or an appropriate revenue sharing arrangement should be arrived at before the airport is transferred to a private party, it adds. 

The Tamil Nadu government said the policy decision was taken considering the State’s investment in land assets before the transfer to AAI.

Why are Chhattisgarh and Jharkhand backing Tamil Nadu?

The non-BJP ruled states of Chhattisgarh and Jharkhand have also demanded a share of the revenue from privatised airports. Chhattisgarh minister T S Singh Deo said when the Centre and state come together for an earning project, the government’s capital is present as a shareholder in terms of the land.  

“So long as it is in the government sector, things are moving in a particular way, the Government of India would be making some revenue and there would be something spilling over to the state government and there would be a benefit to the public, so that is fine,” the minister said, and added, “Now when you are selling it to a third entity which is a private party, then you are selling the assets of the company, which include apart from the infrastructure, the land also. So, the state government should be given the value of the land.”

He noted that the sale will be by means of a valuation of the entire property which and that will include the sale price of the land.

“When you are in a joint venture then the investment which has been made, the Government of India would put in capital in terms of infrastructure, the State government puts up its capital in terms of its land. So, definitely in every such venture, the value of the land should be given to the State government if and when it is sold to a third party which is a private player,” the Minister added.

Jharkhand Finance Minister Rameshwar Oraon also backed the proposal. “Land belongs to the state. When it is under the central government, we have no issues, we give land, water and other resources. But if the Centre is handing it over to private parties, revenue should be shared with the state government. A policy should be framed in this regard for all the states, not just Jharkhand,” Mr. Oraon said.

Has the Centre agreed to the demand?

The Ministry of Civil Aviation is yet to officially comment on the matter. Officials were quoted as saying in a news agency report that a decision regarding the matter will be taken at the higher levels of the government.

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