Airports Economic Regulatory Authority (AERA) Bill 2019

Context:

• Recently, both Lok Sabha and Rajya Sabha passed Airports Economic Regulatory Authority (AERA) Bill 2019 amending the Airports Economic Regulatory Authority of India Act, 2008.

What is Airports Economic Regulatory Authority (AERA)?

• The authority is a statutory body constituted under the Airports Economic Regulatory Authority of India Act, 2008.
• The regulator has the powers to set the tariffs charged at airports.
• It was established by the Government with its head office at Delhi.
• It’s statutory functions are:
  • To determine the tariff for the aeronautical services taking into consideration:
    • 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.
  • To determine the amount of the Development Fees and Passengers Service Fee levied in respect of major airports.
  • 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.

What was the need of bringing AERA Act 2008?

• Before introduction of this act private players were operating civilian airports. Typically, airports run the risk of becoming a monopoly because cities usually have one civilian airport which controls all aeronautical services in that area. 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.
• AERA regulates tariffs and other charges-development fee and passenger service fee for aeronautical services like air traffic management, landing and parking of aircraft, ground handling services at major airports. Major airports include civilian airports with annual traffic above 15 lakh passengers. In 2018-19, there were 32 such airports.  As of June 2019, 27 of these are being regulated by AERA.
• Before AERA was set up, the Airports Authority of India (AAI) fixed the aeronautical charges for the airports under its control and prescribed performance standards for all airports and monitored them. Various committees had noted that AAI performed the role of airport operator as well as the regulator, which resulted in conflict of interest. Hence a need was felt to have an independent regulatory authority.

What was the need for introducing 2019 bill amending the Act of 2008?

• When AERA was created in 2008, there were 11 airports with annual passenger traffic over 15 lakh.  With increase in passenger traffic across airports, currently 32 airports are above this threshold and AERA regulates tariffs at 27 of these. The Bill increases the threshold of annual passenger traffic for major airports to over 35 lakh.  With this increase in threshold, 16 airports will be regulated by AERA.
• The exponential growth of the aviation 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.
• This bill tries to solve this challenging situation for AERA. It answers the question of whether this problem can be resolved by reducing its jurisdiction or by improving its capacity.

What are the major provisions of this newly introduced 2019 bill?

• Currently, AERA regulates tariffs and other charges for aeronautical services provided at civilian airports with annual traffic above 15 lakh passengers. If the amendment is passed by Parliament, the definition of major airports will change to any aerodrome which has or is designated to have an annual passenger capacity of 3.5 million.
• Sixteen airports will be under the jurisdiction of AERA. All the other airports which would not be major airports will continue to be looked after by the Ministry of Civil Aviation and the Government of India.
• Major Airports:

• The amendment will allow the authority to bid out any new airport at a pre-determined tariff structure.

What are the issues with this bill?

• It is expected that the bill will not protect the interests of 344 million people (figure of airline passengers) but instead deeply affect their pockets.
• There was the need for a level playing field and by amending the definition of a major airport, the regulator’s jurisdiction is being reduced and handed over to private entities.
• Currently 32 airports come in the category of major airports. Out of that, because of the change of definition, there will be only 16. So rest of the airports will be left either to the diktats of airport authority or private operators.
• This privatisation of the airports and bidding system would impact the growth rate of the aviation sector, which is presently growing at around 10%.
• After this Bill, the government would not be able to fulfill its target to take the air travel to common man as air tickets would be costlier after this.
  • Contrary to the provisions in the Act of 2008, 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.

Conclusion:

• The bill very aptly solves the problem faced by the AERA of handling such large numbers of airports that too with limited resources. It will unburden their work. However, after some years from now, it will be needed to bring another bill amending the Act as 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.
• However for the present situation with this bill the problem needs to be addressed is the original issue which caused the introduction AERA Act 2008- handling over of the airports to the private players, their monopoly and increase in the fares of the air travel. This will affect the expenditure of the common man and is against the vision of the government- “UDAAN”- Ude Desh Ka Aam Nagrik.

Practice Question:

Recently Parliament has passed Airports Economic Regulatory Authority (AERA) Bill 2019 amending the AERA Act 2008. Discuss why the Act of 2008 was introduced, why it was needed to be amended now and what are the possible issues that may come up due to this bill in the long run.