RSTV: THE BIG PICTURE- AERA (AMENDMENT) BILL, 2019
Introduction:
The Rajya Sabha passed the Airports Economic Regulatory Authority of India (Amendment) Bill, 2019 that seeks to raise threshold for an airport to qualify as ‘major airport’ and hence reducing the tariff-fixing power of airport regulator to a fewer airports. The Bill was passed after discussion and reply on it by Civil Aviation Minister Hardeep Singh Puri. Currently, an airport with annual passenger traffic of 15 lakh or more is defined as major airport and tariff at such airports are determined by Airports Economic Regulatory Authority of India (AERA). The Bill raises the threshold traffic to 35 lakh, so, many airports would come out of the purview of the regulator. Once the Bill becomes an Act, many airports for which various fees such as landing and parking charges which are currently determined by AERA will go. Tariff at these airports would be determined by the Ministry of Civil Aviation. The amendment also empowers the Aviation Ministry to bid out airport projects on the basis of pre-determined tariff.
Airports Economic Regulatory Authority:
The Airports Economic Regulatory Authority (AERA) is a statutory body constituted under the Airports Economic Regulatory Authority of India Act, 2008.
The statutory functions of the AERA as enshrined in the Airports Economic Regulatory Authority of India Act, 2008 are as below:
- To determine the tariff for the aeronautical services taking into consideration:
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- The capital expenditure incurred and timely investment in improvement of airport facilities.
- The service provided, its quality and other relevant factors.
- The cost for improving efficiency.
- Economic and viable operation of major airports.
- Revenue received from services other than the aeronautical services.
- The concession offered by the Central Government in any agreement or memorandum of understanding or otherwise.
- Any other factor which may be relevant for the purposes of this Act.
- To determine the amount of the Development Fees in respect of major airports.
- To determine the amount of the Passengers Service Fee levied under rule 88 of the Aircraft Rules, 1937 made under the Aircraft Act, 1934.
- To monitor the set Performance Standards relating to quality, continuity and reliability of service as may be specified by the Central Government or any authority authorized by it in this behalf.
- To call for such information as may be necessary to determine the tariff under clause (a).
- To perform such other functions relating to tariff, as may be entrusted to it by the Central Government or as may be necessary to carry out the provisions of this Act.
What changes are being proposed in the Bill?
The Bill seeks to do two things:
- 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.
- 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 there is need of amendment?
- The exponential growth of the sector has put tremendous pressure on AERA, while its resources are limited.
- It does not have enough resources to handle the increase in traffic.
- Therefore, if too many airports come under the purview of AERA, it will not be able to perform its functions efficiently.
- All sectors need to contribute to the target of 5 trillion economy.
- To shift the burden from regulator to the government.
- Need of strict regulation in place to handle losses.
- The act will give boost to the industry.
How would the Bill affect the regulatory regime?
- Currently, there are 31 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.
List of major airports in India (as on March 2019):
Airports with annual traffic above 35 lakh
Ahmedabad
Bengaluru
Bhubaneswar
Chennai
Cochin
Delhi
Goa
Guwahati
Hyderabad
Jaipur
Kolkata
Lucknow
Mumbai
Patna
Pune
Thiruvananthapuram
Airport with annual traffic between 15 and 35 lakh
Amritsar
Bagdogra
Calicut
Chandigrah
Coimbatore
Indore
Madurai*
Mangalore
Nagpur
Port blair*
Raipur*
Ranchi*
Srinagar
Trichy*
Varanasi
Vishakhapatnam
*= AERA does not regulate tariffs at these airports currently.
Criticism:
- Authority of the AERA will reduce.
- Burden may fall on the consumer section.
Way Forward:
- Independent regulator is the need to maintain the desired cost.
- Need to strengthen AERA to handle the increasing capacity.
- The regulator need to work in an efficient manner and cater safety and best performance.
- Technical inputs should be taken wrt to the bill.
- We need one hub India which should be developed as an international hub.
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