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Airports Economic Regulatory Authority of India (Amendment) Bill, 2019

Topics covered:

  1. Government policies and interventions for development in various sectors and issues arising out of their design and implementation.

 

Airports Economic Regulatory Authority of India (Amendment) Bill, 2019

 

What to study?

For prelims and mains: AERA- key features, composition, functions and recent amendments proposed.

 

Context: Rajya Sabha recently passed the Airports Economic Regulatory Authority of India (Amendment) Bill, 2019

The Bill amends the Airports Economic Regulatory Authority of India Act, 2008

 

Background:

The Airports Economic Regulatory Authority of India Act, 2008 established the Airports Economic Regulatory Authority of India (AERA)

Functions: AERA regulates tariffs and other charges for aeronautical services provided at civilian airports with annual traffic above 15 lakh passengers.  It also monitors the performance standard of services across these airports. 

 

Why was AERA created, and what is its role? 

To ensure that private airport operators do not misuse their monopoly, the need for an independent tariff regulator in the airport sector was felt. Consequently, the Airports Economic Regulatory Authority of India Act, 2008 (AERA Act) was passed which set up AERA.  

 

What changes are being proposed in the Bill?

The Bill seeks to do two things:

  1. Definition of major airports: Currently, the AERA Act defines a major airport as one with annual passenger traffic over 15 lakh, or any other airports as notified by the central government.  The Bill increases the threshold of annual passenger traffic for major airports to over 35 lakh.  
  2. Tariff determination by AERA: Under the Act, AERA is responsible for determining the: (i) tariff for aeronautical services every five years, (ii) development fees, and (iii) passengers service fee.  It can also amend the tariffs in the interim period.  The Bill adds that AERA will not determine: (i) tariff, (ii) tariff structures, or (iii) development fees, in certain cases.  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 consulted (by the concessioning authority, the Ministry of Civil Aviation) before incorporating such tariffs in the bid document, and such tariffs must be notified. 

 

Why is the Act getting amended?

The exponential growth of the sector has put tremendous pressure on AERA, while its resources are limited.  Therefore, if too many airports come under the purview of AERA, it will not be able to perform its functions efficiently. 

 

How would the Bill affect the regulatory regime?

Currently, there are 32 major airports (annual traffic above 15 lakh), and AERA regulates tariffs at 27 of these.  As per the Bill, AERA will regulate 16 major airports (annual traffic above 35 lakh).  The remaining 16 airports will be regulated by AAI.  Till 2030-31, air traffic in the country is expected to grow at an average annual rate of 10-11%.  This implies that in a few 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.  The table below provides the current list of major airports: