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Earlier this week, Rajya Sabha passed the Airports Economic Regulatory Authority of India (Amendment) Bill, 2019, and the Bill is now pending in Lok Sabha. The Bill amends the Airports Economic Regulatory Authority of India Act, 2008. The Act established the Airports Economic Regulatory Authority of India (AERA). AERA regulates tariffs and other charges for aeronautical services provided at civilian airports with annual traffic above 15 lakh passengers. It also monitors the performance standard of services across these airports. In this post, we explain the amendments that the Bill seeks to bring in and some of the issues around the functioning of the regulator.
Why was AERA created, and what is its role?
Few years back, private players started 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 (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 (see Table 1). As of June 2019, 27 of these are being regulated by AERA (AERA also regulates tariffs at the Kannur airport which was used by 89,127 passengers in 2018-19). For the remaining airports, tariffs are determined by the Airports Authority of India (AAI), which is a body under the Ministry of Civil Aviation that also operates airports.
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 is the Act getting amended?
The Statement of Objects and Reasons of the Bill states that the exponential growth of the 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. If the challenge for AERA is availability of limited resources, the question is whether this problem may be resolved by reducing its jurisdiction (as the Bill is doing), or by improving its capacity.
Will the proposed amendments strengthen the role of the regulator?
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. 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. It may be argued that instead of strengthening the role of the regulator, its purview is being reduced.
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. Further, there was a natural monopoly in airports and air traffic control. In order to regulate the growing competition in the airline industry, and to provide a level playing field among different categories of airports, AERA was set up. During the deliberations of the Standing Committee examining the AERA Bill, 2007, the Ministry of Civil Aviation had noted that AERA should regulate tariff and monitor performance standards only at major airports. Depending upon future developments in the sector, other functions could be subsequently assigned to the regulator.
How would the Bill affect the regulatory regime?
Currently, there are 32 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. The table below provides the current list of major airports:
Table 1: List of major airports in India (as on March 2019)
| Airports with annual traffic above 35 lakh | Airports with annual traffic between 15 and 35 lakh | ||||
|
Ahmedabad |
Goa |
Mumbai |
Amritsar |
Madurai* |
Srinagar |
|
Bengaluru |
Guwahati |
Patna |
Bagdogra |
Mangalore |
Trichy* |
|
Bhubaneswar |
Hyderabad |
Pune |
Calicut |
Nagpur |
Varanasi |
|
Chennai |
Jaipur |
Thiruvananthapuram |
Chandigarh |
Port Blair* |
Vishakhapatnam |
|
Cochin |
Kolkata |
Coimbatore |
Raipur* |
||
|
Delhi |
Lucknow |
Indore |
Ranchi* |
||
* - AERA does not regulate tariffs at these airports currently.
Sources: AAI Traffic News; AERA website; PRS.
As the dust settles around the 16th Lok Sabha, attention must now shift to the state assemblies, some of which have been newly constituted like Rajasthan, Chhattisgarh, Madhya Pradesh, Odisha, Andhra Pradesh and the few that will go into elections in the next few months like Maharashtra and Haryana. There are 30 state legislative assemblies not including the newly formed state of Seemandhara. In our federal structure, laws framed by the state assemblies are no less important and deserve the same diligence and debate as laws made by Parliament. A brief look in to the performance of some of our state assemblies reveals that these institutions which form the cornerstones of our democracy need some serious attention. State Assemblies: business hours The current Haryana Legislative Assembly that comes to the end of its five year term in October this year has held 10 sessions since 2009 till March 2014, meeting for a total of 54 days – an average of 11 days per year. In comparison, the Lok Sabha sat for an average of 69 days each year from 2009 to 2014. Among state assemblies, only Nagaland and Arunachal Pradesh sat for fewer days than Haryana. In the same period the Kerala Assembly sat for an average of 50 days per year, while Tamil Nadu Assembly sat for 44 days. In its previous term, the Gujarat Legislative Assembly sat for a total of 157 days – an average of 31 days each year. Similarly, the current Goa Legislative Assembly sat for 24 days in 2012 and for 39 days in 2013. Over the last 10 years, the Assembly sat for an average of 26 days a year. It recorded the highest number of sitting days in the last 10 years, at 39 days. Law making in the states In most states, Bills are passed with little or no discussion. Most Bills are introduced and passed on the last day of each session, which gives Members hardly any opportunity to examine or discuss legislation in detail. Unlike Parliament, where most Bills are referred to a department related standing committee which studies the Bill in greater detail, in most states such committees are non-existent. The exceptions are Kerala which has constituted subject committees for this purpose and states like Goa and Himachal Pradesh where Select Committees are constituted for important Bills. The current Haryana Assembly has passed 129 Bills, all of which were passed on the same day as they were introduced. Upto 23 Bills were passed on a single day, which left hardly any time for substantial discussion. In the twelfth Gujarat Assembly, over 90% of all Bills were passed on the same day as they were introduced. In the Budget Session of 2011, 31 Bills were passed of which 21 were introduced and passed within three sitting days. Of the 40 Bills passed by the Goa Assembly till May 2013, three Bills were referred to Select Committees. Excluding Appropriation Bills, the Assembly passed 32 Bills, which were taken up together for discussion and passing in five days. Almost all Bills were passed within three days of introduction. On average, each Bill was discussed for four minutes. In 2012, the West Bengal Legislative Assembly passed a total of 39 Bills, including Appropriation Bills. Most Bills were passed on the same day they were introduced in the Assembly. In 2011, a total of 23 Bills were passed. On average, five Members participated in the discussions on each Bill. In 2012, the Delhi Legislative Assembly passed 11 Bills. Only one of the 11 Bills was discussed for more than 10 minutes. The performance of the Chhattisgarh and Bihar Vidhan Sabhas follow the same pattern. Over the last few years, some assemblies such as Andhra Pradesh, Rajasthan and Haryana have taken some positive steps which include setting up subject committees and permitting live telecast of Assembly proceedings. Every legislator- in Parliament and the states - is accountable to his voter. Weak democratic institutions deprive legislators of their right to oversee the government as enshrined in the Constitution. Inadequate number of sitting days, lack of discussion on Bills, and passing of the Budget and demands for grants without discussion are symptoms of institutional ennui and do not do justice to the enormous import of these legislative bodies. Serious thought and public debate is needed to reinvigorate these ‘temples of democracy’ and provide elected representatives with the opportunity to exercise their right to legislative scrutiny, hold government to account, and represent their constituents.
