Airport Economic Regulatory Authority (Amendment) Bill, 2019

Author: Mudra Motivaras, 1st Year, LL.B, Jitendra Chauhan Law College, Mumbai. The articles have been written by the author while pursuing the internship programme with us. Introduction On 16th July, 2019, Airport Economic Regulatory Authority (Amendment) Bill, 2019 was first passed in Rajya Sabha by Hon’ble Civil Aviation Minister, Hardeep Singh Puri. It amended Airport Economic Regulatory Authority Act, 2008[1] which established AERA (Airport Economic Regulatory Authority). The bill was passed in Lok Sabha by voice vote and on 7th August 2019, President Ram Nath Kovind approved the Bill. The purpose of the bill is to amend the definition of major airports thereby, reducing its number. It also amends the role of AERA in determining tariff and other charges. Earlier, AERA Bill, 2018 was introduced by Civil Aviation Minister Jayant Sinha to amend definition of Major Airports as well as provision for new tariff models. Unfortunately, it could not be passed as the NDA government’s first term ended. So on 24th June 2019, cabinet approved AERA Bill, 2019. Meaning of AERA AERA (Airport Economic Regulatory Authority) is an independent authority which regulates tariff and other charges for aeronautical services at major airports. Consequently, AERA Act,2008 was passed to set up AERA. According to AERA, Airports having a traffic of more than 15 lakh are considered major airports and are guided by AERA whereas airports having tariff of less than 15 lakh comes under Airport Authority of India. Before AERA came into picture, airports were managed by AAI. After privatization of aeronautical services, some changes were made in the civil aviation policy to avoid private monopolies and this led to the establishment of AERA. It is set up to ensure transparency for the interest of customers and service providers. Functions of AERA ● To determine the tariff or operation cost or airport charges of the major airports. ● To determine the amount of development fees in respect of the major airports. ● To determine the amount of passenger service fee levied under rule 88 of the Aircraft Rules, 1937 made under the Aircraft Act, 1934.[2] ● To set up performance standards for providing quality services to the customers and to also monitor these standards. ● To call for such information as may be necessary to determine the tariff under clause (a). ● To perform such other functions as related 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. Changes proposed to the bill Firstly, The Bill proposes to change the definition of ‘major airports’ provided under section 2 of AERA Act, 2008. It says: In section 2 of the Airports Economic Regulatory Authority of India Act, 2008 (hereinafter referred to as the principal Act). in clause (i). for the words “one and a half million”, the words “three and a half million” shall be substituted.[3] The bill increases the threshold of annual passengers traffic for major airports to over 35 lakh. This will reduce the number of major airports from 28 to 16. Airports that cease to be identified as major airports will be managed by the Ministry of Civil Aviation. So tariff charges will also be decided by the Ministry of Civil Aviation. Secondly, it amends section 13 of AERA Act, 2008 by adding sub-section (1A) after subsection (1). It says: “(lA) Notwithstanding anything contained in sub-sections (I) and (2), the Authority shall not determine the tariff or tariff structure or the amount of development fees in respect of all airport or part thereof’, if such tariff or tariff structures or the amount of development fees has been incorporated in the bidding document, which is the basis for award of operator ship of that airport. Provided that the Authority shall be consulted in advance regarding the tariff, tariff structures or amount of development fees which is proposed to him incorporated in the said bidding document and such tariff, tariff structures or the amount of development fees shall he be notified in the Official Gazette.”[4] Basically it says that AERA will not determine tariff or tariff structure or amount of development fees in certain cases. This case includes those where such tariff amounts were part of a bid document on the basis of which airport operations were rewarded.[5] AERA will be consulted by the concessioning authority before incorporating such tariffs in the bid document and such tariffs shall be notified.[6] Reasons for amendment ● There has been a tremendous growth in airport traffic. Currently, airport traffic accounts to over 350 million people. When the AERA Act, 2008 was enacted, the number of major airports was 11 which has increased to 28 by now. So by increasing the threshold limit from 1.5 million people to 3.5 million people, the burden on AERA will be reduced as the number of major airports will be reduced to 16. ● With limited resources it was difficult for AERA to manage all the major airports. AERA now will not determine tariff or any development fees for major airports. Determining of tariff, development fees and bidding out of airport projects will be done by the Ministry of Civil Aviation. ● The airports which will come under the purview of AERA, will be benefited with low airport cost levied by Airport Authority of India. ● Smaller airports will be saved from private monopolies due to government control. Drawbacks of the bill ● It can be argued that instead of reducing the scope of AERA, more resources could have been provided to it. ● Changing the definition of major airports is not a solution because airports traffic is going to increase. So, every time the number of major airports cannot be reduced. ● Currently AAI is also working as a regulator as well as operator though established a separate body for regulating aviation sector ● Change in the bidding system by awarding an airport on the basis of ‘predetermined tariff’ will lead to an increase in high passenger charges. This is against the UDAN (Ude Desh Ka Aam Nagrik) scheme. Conclusion AERA (amendment) Bill, 2019 is helpful in reducing the burden of AERA. But the reason for establishing a separate authority for the airline sector was to reduce the burden of the Airport Authority of India. The main role of AERA was to regulate the airports which have passenger traffic of more than 15 lakh. So why are we now introducing a new bill to reduce the burden of AERA? Is this just due to an increase in passengers’ traffic and lack of resources? If yes, then this is not the solution. Air traffic is expected to grow at an average rate of 10-11%. So how many times will the government introduce new amendments to this act? Also, the second most important role of AERA is to determine tariff or tariff structure which is taken away by this bill. This role will be now given to AAI. Then what is the purpose of AERA? In my view, the government should provide necessary resources which will make AERA a strong regulator. It should also be given the role of inspecting airports and analyzing tariff and other charges. An independent regulator will lead to development of the airline sector and building of new airports in the country. [1] Airport Economic Regulatory Authority Act, 2008, No. 27, Acts of Parliament, 2008 (India). [2] The Aircraft Act, 1934, No. 22, Act of Parliament, 1934 (India).

[3] Airport Economic Regulatory Authority (Amendment) Bill, 2019, 27 of 2019, Cl. i, http://aera.gov.in/content/. [4] Airport Economic Regulatory Authority (Amendment) Bill, 2019, 27 of 2019, Cl. 1A, http://aera.gov.in/content/. [5] The Big Picture- AERA (Amendment) Bill, 2019, INSIGHTSIAS, (July 26, 2019), https://www.insightsonindia.com/2019/07/26/rstv-the-big-picture-aera-amendment-bill-2019/. [6] Prachi Mishra, Understanding the AREA (Amendment) Bill, 2019, THE PRS BLOG, (July 19, 2019), https://www.prsindia.org/theprsblog/understanding-aera-amendment-bill-2019. Disclaimer: Views and opinions as expressed in the Research Articles are solely of the author and any member of the core team of the website shall not be liable for the same.

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