Tags:
Journalism of Courage
The move to go ahead with the privatisation of Delhi and Mumbai airports, with foreign direct investment being limited to 49 per cent, sends out two positive signals. First, that this government intends to do something to improve the pathetic condition of Indian airports and, two, despite being under pressure from the Left, the Manmohan Singh government is willing to rope in foreign and domestic private players to revamp and modernise the two most important airports in the country.
It8217;s not the sectoral cap for FDI that is important here. Foreign and domestic investors will now be allowed to hold 74 per cent, with the share of the government-run Airports Authority of India being restricted to 26 per cent. And within the 74 per cent, foreign investors would be the majority shareholders, holding up to 49 per cent equity. Therefore, private investors get more than a lion8217;s share of the equity and they should be willing to invest as long as the government gives them full autonomy and management control to build and run the airports in a professional manner. Over the last 14 years, various governments have tended to either remove or set new FDI caps. But the telecom sector flourished despite having a sectoral cap of 49 per cent. Similarly, foreign companies have entered the insurance sector despite an even lower cap. At the same time in some areas such as power, where 100 per cent FDI is allowed, foreign investors packed their bags and left the country. The upshot is that money would pour into the building of airports if the government is indeed keen on promoting this critical infrastructure. And, for that, all they have to do is formulate a clear set of guidelines of what they expect of the private operators and then distance themselves from the day-to-day running of the business. It is the manner in which the government conducts itself that becomes important. It would certainly put investors off if it were to make last minute changes or introduce totally unacceptable clauses in agreements. Investors abhor uncertainty and the new government should desist from introducing it.
