The Airports Economic Regulatory Authority of India Amendment Bill was passed in Lok Shaba on 29 July 2021. The bill was introduced in Lok Shaba on 24 March 2021 by Civil Aviation minister Jyotiraditya Scindia and was referred to the Standing Committee on Transport, Tourism, and Culture. It seeks to amend the AERA Act, 2008. The bill regulates tariffs and other charges for aeronautical services from airports and monitors the performance standards of airports. It also established an Appellate Tribunal, which is the Airport Economic Regulatory Authority (AERA), to abjugate disputes and to dispose of appeals related to this field.
AERA Act, 2008
The Act applies to all airports, including private airports, leased airports, civil enclaves, major airports where air transport services operated or intended to be operated other than airports and airfields that belong to the Armed Forces and Paramilitary forces of the country.
The aeronautical services include services provided for navigation, surveillance, supportive communication services for air traffic management. It also provides landing services, grounding, and housing services of aircraft, parking services, fuel services, and cargo facilities in an airport.
According to this Act, an airport with at least 35 lakh annual passenger traffic is considered a significant airport. The central government can also designate any airport as a major airport by a notification.
The Airport Economic Regulatory Authority (AERA)
The Airport Authority of India (AAI) was the institution that initially ran the airports in the country. A change in a civil aviation policy enabled private parties the authority to run airports. Since most cities only have a single civilian airport that controls all aeronautical services in that area, there was a risk of airports becoming a monopoly. The need for an independent regulator in the airport sector arose to prevent the private sector operators from misusing their monopoly.
The Airport Economic Regulatory Authority (AREA) is set up as a statutory body to have an independent regulatory board that has transparent rules and can take care of the requirements of the service providers and the customers. The authority consists of a chairperson and two other members appointed by the central government. AERA will determine the tariff for aeronautical services, the development fees for major airports, and the passenger fees levied under Rule 88 of the Aircraft Rule, 1937.
The tariff for aeronautical services is determined taking into consideration the capital expenditure incurred, timely investment in the improvement of airport facilities, quality of service provided, the cost for improving the efficiency of airports, economical and effective operation of airports, revenue received from non-aeronautical services and concessions from the government. The authority also monitors the performance standards related to quality, continuity, and reliability of service as specified by the central government. The tariff is determined every five years.
The transparency is ensured by holding consultations with stakeholders with the airports as well as by documenting all the decisions made and receiving submissions from stakeholders. AERA also has the authority to call for information and conduct inquiries and investigations regarding any matters related to the airport sector.
The Airports Economic Regulatory Authority of India (Amendment) Act, 2021
The Amendment changed the definition of a major airport to insert the words “a group of airports” after the words “any other airports” in Section 2 clause (i) of AERA Act, 2008.
The Amendment bill will help in the central government’s plan for privatization of smaller airports as part of the asset monetization programme announced during the budget of 2021- 2022. The bill will help in the faster development of smaller airports and accelerating the regional air connectivity or UDAN scheme by expanding the air connectivity to remote areas. The government plans to club profitable airports with non-profitable ones and to promote them as a package for development in the public-private partnership (PPP) model to expand connectivity. The Amendment will allow AERA to regulate tariff and other charges not just for major airports but also for a group of airports together.
Challenges of the AERA Amendment Bill
The major challenges emerge from two factors, i.e., the clubbing of airports and the capacity of the regulator.
- Clubbing of airports: The Amendment was made to club profit-making airports with smaller airports and offered them as a package to private bidders to revive small airports. One of the ways in which tariffs would be structured is through cross-subsidies. This might lead to pricing problems in the long term. The revenue from the smaller airports will be compensated with the profit-making ones, which will increase the service costs or might reduce the profit of larger airports.
- The capacity of AERA: When AERA was introduced, it had to determine the tariffs and monitor performance standards of major airports in the country; the rest of the airports were handled by the AAI. There are 125 operational airports in India as of 2020. The number of airports under AERA went from 11 in 2008 to 24 in 2019. The inclusion of more airports under AERA will affect the efficiency of the institution because of limited resources.