Applications for the LAMP Fellowship 2025-26 will open on December 1, 2024. Sign up here to be notified when applications open.

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.

In light of recent debates surrounding the implementation of the Mid Day Meal Scheme (MDMS) in certain states, it is useful to understand the basic features of the scheme. The MDMS is the world’s largest school meal programme and reaches an estimated 12 crore children across 12 lakh schools in India. A brief introduction follows, outlining the key objectives and provisions of the scheme; modes of financing; monitoring and evaluation mechanisms and issues with implementation of the scheme. Examples of 'best practices' and major recommendations made by the Planning Commission to improve the implementation of the scheme are also mentioned. Provisions:  The MDMS emerged out of the National Programme of Nutritional Support to Primary Education (NP – NSPE), a centrally sponsored scheme formulated in 1995 to improve enrollment, attendance and retention by providing free food grains to government run primary schools. In 2002, the Supreme Court directed the government to provide cooked mid day meals (as opposed to providing dry rations) in all government and government aided primary schools.[1] Calorie norms for the meals have been regularly revised starting from 300 calories in 2004, when the scheme was relaunched as the Mid Day Meal Scheme. At present the MDMS provides children in government aided schools and education centres a cooked meal for a minimum of 200 days.[2] Table 1 outlines the prescribed nutritional content of the meals. Table 1: Prescribed nutritional content for mid day meals 

Item Primary (grade 1-5) Upper Primary(grade 6-8)
Calories 450 700
Protein (in grams) 12 20

Source: Annual Report, 2011 – 12, Ministry of Human Resource Development, Government of India; PRS. Objectives: The key objectives of the MDMS are to address the issues of hunger and education in schools by serving hot cooked meals; improve the nutritional status of children and improve enrollment, attendance and retention rates in schools and other education centres. Finances: The cost of the MDMS is shared between the central and state governments. The central government provides free food grains to the states. The cost of cooking, infrastructure development, transportation of food grains and payment of honorarium to cooks and helpers is shared by the centre with the state governments. The central government provides a greater share of funds. The contribution of state governments differs from state to state. Table 2 outlines the key areas of expenditure incurred by the central government under the MDMS for the year 2012 – 2013. Table 2: Key areas of expenditure in the MDMS (2012 - 2013)

Area of expenditure                                      Percentage of total cost allocated
Cooking cost 53
Cook / helper 20
Cost of food grain 14
Transportation assistance 2
Management monitoring and evaluation 2
Non recurring costs 10

Source: Ministry of Human Resource Development; Fourth NSCM Committee meeting, August 24, 2012; PRS. Monitoring and Evaluation: There are some inter state variations in the monitoring and evaluation mechanisms of the MDMS.  A National Steering cum Monitoring Committee and a Programme Approval Board have been established at the national level, to monitor the programme, conduct impact assessments, coordinate between state governments and provide policy advice to central and state governments. Review Missions consisting of representatives from central and state governments and non governmental agencies have been established. In addition, independent monitoring institutions such as state universities and research institutions monitor the implementation of the scheme. At the state level, a three tier monitoring mechanism exists in the form of state, district and block level steering cum monitoring committees. Gram panchayats and municipalities are responsible for day to day supervision and may assign the supervision of the programme at the school level to the Village Education Committee, School Management and Development Committee or Parent Teacher Association. Key issues with implementation: While there is significant inter-state variation in the implementation of the MDSM, there are some common concerns with the implementation of the scheme. Some of the concerns highlighted by the Ministry for Human Resource Development based on progress reports submitted by the states in 2012 are detailed in Table 3. Table 3: Key implementation issues in the MDMS

Issue State(s) where these problems have been reported
Irregularity in serving meals Karnataka, Madhya Pradesh, Orissa, Rajasthan, Maharashtra, Arunachal Pradesh
Irregularity in supply of food grains to schools Orissa, Maharashtra, Tripura, Karnataka, Arunachal Pradesh, Meghalaya, Delhi, Andhra Pradesh
Caste based discrimination in serving of food Orissa, Rajasthan, Madhya Pradesh
Poor quality of food Rajasthan, Tamil Nadu, Delhi, Chhattisgarh
Poor coverage under School Health Programme Orissa, Jharkhand, Madhya Pradesh, Rajasthan, Uttar Pradesh, Manipur, Arunachal Pradesh, Himachal Pradesh, Chhattisgarh
Poor infrastructure (kitchen sheds in particular) Andhra Pradesh, Tamil Nadu, Puducherry, Gujarat, Chandigarh, Himachal Pradesh, Jammu and Kashmir, Orissa
Poor hygiene Delhi, Rajasthan, Puducherry,
Poor community participation Most states – Delhi, Jharkhand, Manipur, Andhra Pradesh in particular

Source: Ministry of Human Resource Development; PRS. Best practices: Several state governments have evolved practices to improve the implementation of the MDMS in their states. These include involving mothers of students in implementation of the scheme in Uttarakhand and Jharkhand; creation of kitchen gardens, i.e., food is grown in the premises of the school, in Andhra Pradesh, Karnataka, Punjab and West Bengal; construction of dining halls in Tamil Nadu; and increased community participation in the implementation of the scheme Gujarat. More information is available here. Planning Commission evaluation of MDMS: In 2010, a Planning Commission evaluation of the MDMS made the following recommendations to improve implementation of the scheme: i. Steering cum monitoring committees at the district and block levels should be made more effective. ii. Food grains must be delivered directly to the school by the PDS dealer. iii. The key implementation authority must be made responsible for cooking, serving food and cleaning utensils, and school staff should have a supervisory role.  The authority should consist of local women’s self help groups or mothers of children studying in the schools. iv. Given the fluctuating cost of food grains, a review of the funds allocated to the key implementation authority must be done at least once in 6 months. v. Services might be delivered through private providers under a public private partnership model, as has been done in Andhra Pradesh.


[1] PUCL vs. Union of India, Writ Petition (Civil) 196 of 2001. [2] The following institutions are covered: Government and government aided schools, National Child Labour Project (NCLP) schools, Education Guarantee Scheme (EGS) and Alternative and Innovative Education (AIE) centres including Madrasas and Maqtabs supported under the SSA