India has emerged as the third largest domestic aviation market in the world.
Increasing passenger load demands for better regulatory structures and hence rejiging the AERA is needed.
What is AERA?
“Airports Economic Regulatory Authority (AERA) of India Act” was passed in 2008, to establish an independent aeronautical regulatory authority.
The authority was to work for the protection of the interest of airports, airlines and passengers and also regulate traffic for aeronautical services.
Aeronautical services primarily include navigation, surveillance and supportive communication for air traffic management and landing facilitation.
Further, housing or parking of an aircraft; ground safety, fuel and handling services, are also covered under aeronautical services.
Why was the need for amending AERA felt?
Workload - Exponential growth in the sector and increase in the number of airports has subjected AERA to tremendous pressure.
The number of major airports increased from 12 to 27 between 2007 and 2017 and numerous minor airports have also seen a spike in traffic.
Notably, a number of private operators have also entered the airline/airport sector, and some major airports are run under public-private partnership.
It was felt that the expanding magnitude of AERA’s workload was affecting its efficiency in determining tariffs and monitoring services at major airports.
New Dynamics - For engaging private players in projects, several business models like predetermined tariff or tariff-based bidding have come up.
With such structures in place, the government has found that the market itself determines the charges and hence alleviating the need for a market regulator.
Hence, as the 2008 AERA act doesn’t cover such complexities, the government has now proposed a bill to amend it.
What does the AERA (Amendment) Bill, 2018 seek to do?
It proposes to amend the definition of “major airport” as any airport with passengers in excess of 3.5 million from the existing 1.5 million.
Further, it seeks to update Section 13 of the 2008 Act in tune with the current business models and tariff system.
Notably, section 13 is an umbrella provision which covers capital expenditure incurred and timely investment in improvement of airport facilities.
Hence, these changes could implicitly mean changes in the tariff for aeronautical services at major airports.
