The Airport Economic Regulatory Authority of India (amendment) bill-2019

The Airports Economic Regulatory Authority of India (Amendment) Bill, 2019 was introduced in Upper House of the Parliament on July 12, 2019, by the Civil Aviation Ministry. The bill amends the Airports Economic Regulatory Authority of India (AERA) Act, 2008.

Airports Economic Regulatory Authority(AERA)

“Airports Economic Regulatory Authority (AERA) of India Act” was approved in 2008, to set up an independent aeronautical regulatory authority. The authority had to work for the protection of the interest of airlines, airports, and passengers and also regulate traffic for aeronautical services. Aeronautical services mainly include surveillance, navigation, and supportive communication for air traffic management and landing facilitation. Further parking or housing of an aircraft, fuel, ground safety, and handling services, are also involved under aeronautical services.

Airports Economic Regulatory Authority (AERA) role

To ensure that private airport operators don’t abuse their monopoly, the requirement for an independent tariff regulator in the airport sector was felt. Consequently, the Airports Economic Regulatory Authority (AERA) Act, 2008 was passed which set up AERA. The AERA regulates tariffs and other charges for aeronautical services provided at civilian airports with annual traffic above 15 lakh passengers.

The key provisions of the amended bill:

  • Definition of major airports:
    The Act states a major airport as one with annual passenger traffic above 15 lakh, or any other airports as notified by the union government. The Bill increases the threshold of annual passenger traffic for major airports to above 35 lakh.

  • Tariff determination by Airports Economic Regulatory Authority (AERA):
    Under the Act, AERA is responsible for determining:
    • the passengers service fee,
    • the tariff for aeronautical services at different airports every 5 years,
    • the development fees of major airports.
    It can also call for required information to determine tariffs and perform any other tariff-related functions, including amending the tariffs if necessary in the meantime.

  • The Bill adds that Airports Economic Regulatory Authority (AERA) will not determine:
    • the development fees, in certain cases.
    • the tariff
    • tariff structures, or
    These cases include those where such tariff amounts were a part of the bid document on the basis of which the airport operations were awarded. AERA will be discussed by the concessioning authority before integrating such tariffs in the bid document, and such tariffs must be notified.

Requirement for reforming earlier act

The rapid growth of the sector has put immense pressure on AERA, while its resources are finite. Therefore, if too many airports come under the purview of AERA, it may not be perform its functions efficiently and productively.

Significance of the amended bill

Presently, there are 32 major airports, and AERA regulates tariffs at 27 of these. Under the Act, AERA will regulate 16 major airports. The remaining 16 airports will be regulated by AAI.
Till 2030-31, air traffic in the country is anticipated to grow at an average annual rate of 10-11%. This implies that in upcoming years, the traffic at the other 16 airports will increase to over 35 lakh and they will again fall under the purview of AERA. This may lead to constant changes in the regulatory regime at these airports.

Arguments that support amendment

  • When the limit was set to 15 lakh passengers, it was approximately 1.1% of the then existing passenger traffic. The civil aviation sector has now grown virtually to 350 lakh million people and this is estimated to grow at an average annual rate of 10-11%. So by increasing the limit to 35 lakh, the ratio has been kept the same (1.1% of the passenger traffic).
  • The large number of airports which are below 35 lakh capacity will be regulated by the Civil Aviation Ministry. So that the aviation industry will not be hampered with the exorbitant aviation charges because of support and concessions given by the government.
  • The aviation industry is growing at a rate of 10%. The AERA does not have that kind of funds and resources to manage that large amount of passengers.
  • These amendments will give a boost to the airline industry which at present making low profits or suffering losses, because of the exorbitant aeronautic charges.
  • The government wants to have a hold on the smaller airports because it is interested in boosting the aviation industry. It wants to make aviation within the affordable and cost-efficient reach of the common people. Regional connectivity is the intent of the government.

Opposition against proposed amendment

  • Different regulator for AAI and AERA while performing in the same field.
  • Government can't provide concessions to every airport for benefiting customers
  • Government will have to define major port again because of 10-11% annual growth rate of passenger
New amendment will decrease the power of AERA.