2012-04-12
While it is generally agreed that an airport makes a significant contribution to the economic activity of the city to which it is attached, the Delhi International Airport Limited (DIAL) has for the first time come out with a study on the economic impact of DIAL on Delhi—as Delhi has not been defined, it is presumed that it means only the National Capital Territory and not Gurgaon or Noida and other areas where DIAL also has a tremendous impact. The study has been done by the National Council of Applied Economic Research (NCAER) and was released in a function on April 10, 2012 by former President of India Abdul Kalam.
This study has shown that the modernisation and expansion of the Delhi airport under public-private partnership has produced tremendous results. Incidentally, the airport has just been ranked as the second best airport in the world in the 25-40 million passenger size category by Airports Council International, which is the official body of international airports. The airport has handled about 30 million passengers in 2010-11, with 30% being international. Delhi has surpassed Mumbai in traffic and is the top Indian airport, as also the only one having two parallel runways. Another milestone is that this airport now earns nearly 45% from non-aeronautical services, perhaps the highest in the country. In a passenger satisfaction survey carried out by an independent agency, 60% participants called it ‘good’ while 20% called it ‘excellent' in a scale of poor/fair/average/good/excellent. The PPP Agreement was signed in 2006 and T3 was ready in 37 months in 2010, a record time in the Indian environment. However, the airport is running up huge losses, amounting to about R900 cores in 2011-12. But that’s another story.
The economic impact on Delhi has been calculated in three different ways by NCAER, namely the direct, indirect and induced ways. According to this study, the airport's contribution to Delhi’s GSDP is 13.53% or R2,94,700 crore, which is about 0.45% of national GDP. It contributed R42,900 crore directly through value added (air transport and airport services), R77,200 crores indirectly through supply chain or multiplier effects, and R1,74,600 crore as induced impact through tourism and investment. On employment creation, the Delhi airport contributes 15,78,000 jobs and represents 25.9 % of Delhi’s employment. Once broken up, this amounts to 64,000 direct jobs, 452,000 indirect jobs and 10,62,000 jobs through impact on tourism and investment. The study has, therefore, elaborated on the impact of the Delhi airport on output, value addition and employment.
What are the lessons to be learnt from this study? The main lesson to be learnt is that for a modern city, an airport is a critical item and is like a catalyst. If an airport shuts down for a week, what will be the loss? With the volcanic ash crisis in Europe in April 2010, airports lost euro 250 million, airlines lost $1.5 billion in one week, and the overall economic loss per day was estimated at $1 billion. What a comparable loss would be in Delhi has not been calculated in the NCAER study.
Another aspect for consideration is the attitude of the government towards aviation. The Centre and states together find this is the goose that lays the golden eggs, and are determined to continue to choke it to death with taxation, in spite of the haemorrhaging taking place. The Centre has levied a service tax on tickets in the current budget. Meanwhile the Delhi government does not realise the economic value of its own airport and insists on a very high sales tax on air turbine fuel (ATF). Along similar lines, Mumbai has successfully managed to choke its growth by not clearing the encroachments on the present airport for many decades and by failing to set up a new airport. Admittedly, building a new airport in Mumbai is expensive and difficult as land is only available far away, and good connectivity has to be maintained between the airport and the city. In this connection, both Bangalore and Hyderabad can be complimented for taking a visionary approach and building new Greenfield airports driven by their state governments. Both cities have benefitted from this. The same can be said of Cochin, which was the first city in India to come up with the PPP model with great participation from its non-resident population.
The Delhi government is singularly lucky in having a Delhi international airport that has 5,500 acres available to it, making it the biggest in the country. However, the role of the local state government is only limited to charging a very high sales tax on ATF, with a demand for its reduction having fallen on deaf ears. This state government is yet to understand the importance of this goldmine it has and how this can further improve the lot of its people.
The role of an Airport City has been touched on in the NCAER report but more is left unsaid than said. Delhi’s potential to be an international aviation hub is dependent upon the government’s bilateral air services agreement policies. While the new T3 terminal is upto this task, the government has, by default, allowed Singapore and Dubai to become our hubs—where Indians love to visit for cheap shopping and a friendly atmosphere, rather than change planes in Delhi or Mumbai.
The author is chairman of International Foundation for Aviation, Aerospace and Development (India Chapter)
While it is generally agreed that an airport makes a significant contribution to the economic activity of the city to which it is attached, the Delhi International Airport Limited (DIAL) has for the first time come out with a study on the economic impact of DIAL on Delhi—as Delhi has not been defined, it is presumed that it means only the National Capital Territory and not Gurgaon or Noida and other areas where DIAL also has a tremendous impact. The study has been done by the National Council of Applied Economic Research (NCAER) and was released in a function on April 10, 2012 by former President of India Abdul Kalam.
This study has shown that the modernisation and expansion of the Delhi airport under public-private partnership has produced tremendous results. Incidentally, the airport has just been ranked as the second best airport in the world in the 25-40 million passenger size category by Airports Council International, which is the official body of international airports. The airport has handled about 30 million passengers in 2010-11, with 30% being international. Delhi has surpassed Mumbai in traffic and is the top Indian airport, as also the only one having two parallel runways. Another milestone is that this airport now earns nearly 45% from non-aeronautical services, perhaps the highest in the country. In a passenger satisfaction survey carried out by an independent agency, 60% participants called it ‘good’ while 20% called it ‘excellent' in a scale of poor/fair/average/good/excellent. The PPP Agreement was signed in 2006 and T3 was ready in 37 months in 2010, a record time in the Indian environment. However, the airport is running up huge losses, amounting to about R900 cores in 2011-12. But that’s another story.
The economic impact on Delhi has been calculated in three different ways by NCAER, namely the direct, indirect and induced ways. According to this study, the airport's contribution to Delhi’s GSDP is 13.53% or R2,94,700 crore, which is about 0.45% of national GDP. It contributed R42,900 crore directly through value added (air transport and airport services), R77,200 crores indirectly through supply chain or multiplier effects, and R1,74,600 crore as induced impact through tourism and investment. On employment creation, the Delhi airport contributes 15,78,000 jobs and represents 25.9 % of Delhi’s employment. Once broken up, this amounts to 64,000 direct jobs, 452,000 indirect jobs and 10,62,000 jobs through impact on tourism and investment. The study has, therefore, elaborated on the impact of the Delhi airport on output, value addition and employment.
What are the lessons to be learnt from this study? The main lesson to be learnt is that for a modern city, an airport is a critical item and is like a catalyst. If an airport shuts down for a week, what will be the loss? With the volcanic ash crisis in Europe in April 2010, airports lost euro 250 million, airlines lost $1.5 billion in one week, and the overall economic loss per day was estimated at $1 billion. What a comparable loss would be in Delhi has not been calculated in the NCAER study.
Another aspect for consideration is the attitude of the government towards aviation. The Centre and states together find this is the goose that lays the golden eggs, and are determined to continue to choke it to death with taxation, in spite of the haemorrhaging taking place. The Centre has levied a service tax on tickets in the current budget. Meanwhile the Delhi government does not realise the economic value of its own airport and insists on a very high sales tax on air turbine fuel (ATF). Along similar lines, Mumbai has successfully managed to choke its growth by not clearing the encroachments on the present airport for many decades and by failing to set up a new airport. Admittedly, building a new airport in Mumbai is expensive and difficult as land is only available far away, and good connectivity has to be maintained between the airport and the city. In this connection, both Bangalore and Hyderabad can be complimented for taking a visionary approach and building new Greenfield airports driven by their state governments. Both cities have benefitted from this. The same can be said of Cochin, which was the first city in India to come up with the PPP model with great participation from its non-resident population.
The Delhi government is singularly lucky in having a Delhi international airport that has 5,500 acres available to it, making it the biggest in the country. However, the role of the local state government is only limited to charging a very high sales tax on ATF, with a demand for its reduction having fallen on deaf ears. This state government is yet to understand the importance of this goldmine it has and how this can further improve the lot of its people.
The role of an Airport City has been touched on in the NCAER report but more is left unsaid than said. Delhi’s potential to be an international aviation hub is dependent upon the government’s bilateral air services agreement policies. While the new T3 terminal is upto this task, the government has, by default, allowed Singapore and Dubai to become our hubs—where Indians love to visit for cheap shopping and a friendly atmosphere, rather than change planes in Delhi or Mumbai.
The author is chairman of International Foundation for Aviation, Aerospace and Development (India Chapter)
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