India Considers Bid Cap in Airport Privatisation to Curb Monopoly

India is considering imposing a cap on bids by a single entity in the planned privatisation of 11 airports amid growing concern over market concentration and the risk of monopoly in the civil aviation sector.

Government officials involved in the process said discussions have begun on ways to structure the bidding rules to encourage competition and prevent crucial infrastructure from getting concentrated in the hands of a single enterprise.

The deliberations come ahead of what is expected to be one of the most significant airport privatisation exercises undertaken in the country.

In the 2018 privatisation round, which didn’t have any such limit, Adani Enterprises emerged as the highest bidder for all the six airports on offer — in some cases quoting double the tender amount of the second-highest contender. Jeet Adani, director at Adani Group, has already signalled that the group will aggressively pursue all 11 airports in the new round, making the issue of placing a cap on bids all the more pressing for policymakers.

However, there is a second school of thought among officials who say that setting a strict threshold could make bidders conservative, potentially lowering auction proceeds.

Under one proposal being discussed, a single entity would be awarded a maximum of two blocks — equivalent to four airports. If the same entity tops the bid for a third block, the second-highest bidder would be given the option to match the price.

Officials from the civil aviation and finance ministries and Niti Aayog are working on the framework, with the final call resting with the Public Private Partnership Appraisal Committee (PPPAC), the government body tasked with approving large-scale infrastructure privatisation.

In a first-of-its-kind approach, planned for the latest privatisation exercise, seven smaller airports will be bundled with six larger ones located in similar geographies, with the aim of attracting private investment to also develop the smaller, less commercially attractive facilities. Under this structure, Varanasi will be paired with Kushinagar and Gaya, while Amritsar, Bhubaneswar, Raipur, and Trichy will be clubbed with Kangra, Tirupati, Aurangabad, and Hubli respectively.

A senior official at the civil aviation ministry said airports are natural monopolies and that excessive concentration poses a systemic risk. He pointed to IndiGo's recent network meltdown — which threw the entire air transport sector into chaos — as a cautionary example of the dangers of relying on a single dominant player.

For instance, Brazil, which has conducted multiple rounds of airport privatisation, has adopted similar safeguards, either prohibiting a single entity from winning more than one airport or barring companies that already operate a major airport from acquiring a controlling stake in another.

However, not everyone in the government is convinced. A finance ministry official cautioned that imposing participation limits could lead to conservative bidding, ultimately reducing the value the Centre would eventually garner from the exercise.

The official noted that the 2018 round of airport privatisation resulted in windfall gains for the Airports Authority of India (AAI) which currently earns more than Rs 700 crore annually in fees from the six airports.

The Centre has set an ambitious monetisation target of Rs 27,500 crore for civil aviation under NMP 2.0 over five years through FY30.