The Government today approved amendments to the Airports Economic Regulatory Authority of India Bill, 2007 pending in the Lok Sabha. The Government also gave its approval for moving the official amendments in the AERA Bill as proposed by the Ministry of Civil Aviation. The Bill is now expected to be introduced in the forthcoming Session of the Lok Sabha and if cleared, it will be notified in three months time.
The AERA Bill was introduced in Lok Sabha on 5 September, 2007. It was, thereafter, referred for the consideration of the Department Related Parliamentary Standing Committee on Transport, Tourism and Culture.
The Standing Committee examined the AERA Bill in consultation with the stakeholders and presented its report to the Parliament on 17 April, 2008. The Committee had made 15 recommendations which were examined by the Ministry of Civil Aviation.
The main recommendations of the Committee were:
• The AERA Bill should be amended to include ‘non-aeronautical services’.
• The fuel supply infrastructure at the airports should be brought under the purview of AERA.
• The role of AERA and its functions should be extended to cover all airports open for operation of commercial flights, irrespective of the size of the airport or ownership or throughput of passengers.
With respect to the first of the three recommendations above, the Ministry of Civil Aviation felt that the airports obtained revenue from two streams, viz., core airport services provided to the aircraft or airlines such landing, parking, housing, communication, navigation and surveillance, air-traffic control, etc. which are the ‘aeronautical services’; and the non-core services such as those provided in the terminals or outside for office space, food and beverages, car parking, etc., i.e., the ‘non-aeronautical services’. While the core services on the aeronautical side are the monopoly of the airport operator, the non-aeronautical services are usually provided through concessionaires, appointed through open competitive bidding processes. Further, normally there are competing outlets in respect of most non-aeronautical services, which are thus, not monopolistic in nature. Hence the Ministry felt that there was no need for regulating charges of ‘non-aeronautical services’ by AERA. The Ministry has also pointed out that major airports earned bulk of their revenue through ‘non-aeronautical services’, which helps them to moderate the aeronautical charges. In India also, there is a trend of increasing non-aeronautical revenues. Hence, the Ministry felt that one of the factors relevant for determining the tariff of the ‘aeronautical services’ could be the revenue generated by the airport operator through ‘non-aeronautical services’. In other words, while the charges for ‘non-aeronautical services’ need not be regulated, per-se, the revenue generated therefrom may be taken as a factor relevant for determination of charges for ‘aeronautical services’ by AERA. This would enable moderation of ‘aeronautical charges through maximization of non-aeronautical revenues. Thus partially accepting the recommendation of the Committee, consequential amendments have been made in the Bill.
The Ministry has also accepted the Committee’s recommendation on fuel supply infrastructure at airports. At most of the airports more than one Oil Companies are available for supply of Aviation Turbine Fuel (ATF). The Companies pay a throughput charge to the airport operator at mutually negotiated rates. The Ministry is of the view that for greater competition in favour of the airlines and for optimal utilization of ground infrastructure, a common fuel supply infrastructure needs to be developed at airports through which Oil Companies can supply ATF to the airports. This common system would be in the control of the airport operator and as such there is a scope of monopolistic practice developing in respect of determination throughput charges. Hence it should be brought in the ambit of AERA.
Besides this, the Ministry suo moto felt that the two services – (a) ground handling services relating to aircraft, passengers and cargo; (b) services relating to the cargo facilities; – which tend to be of monopolistic nature, may also be specifically brought in the ambit of AERA. The Ministry also felt that in the rapidly evolving airport infrastructure secure, it would be prudent to reserve a right for the Government to bring in other services of like nature rendered at the airport, which may develop monopoly character and may, thus, required to be regulated within the scope of the Regulator. Consequential amendments have been made in the Bill.
As per the Bill, AERA shall determine tariff for aeronautical services; amount of development fee; amount of passengers service fees; monitor the set performance standard; and perform such other function relating to tariff as may be entrusted to it by the Central Government, in respect of ‘major airports’, i.e., airports which have, or are designed to have, annual passenger throughput of more than 1.5 million, or any other airport which the Government, by-notification may specify as ‘major airport’. Presently 11 airports/civil enclaves have more than 1.5 million annual passenger throughput. Almost 85% of the revenue and passenger traffic in the country is generated/carried through these 11 major airports. The balance 78 operational airports handle less than 15% of the passenger traffic and generate minimal revenue. The Ministry, therefore, felt that economic regulation of such smaller airports would only lead to cumbersome procedure being applied to such airports without commensurate regulatory benefits. However, if at any stage, it is felt that an airport with less than 1.5 million passengers needed to be brought within the ambit of AERA, the Government would, as per the Bill, be well within in powers to notify such airports as a ‘major airport’. Thus, the Ministry did not find the subject recommendation of the Standing Committee as acceptable.
The Ministry has fully accepted ‘four’ recommendations of the Committee, partially accepted ‘two’ and has not accepted ‘five’. The balance ‘four’ recommendations were not of consequential in nature and were accepted/noted. Thus 11 amendments were introduced to the Bill, ‘six’ of these being of consequential nature.