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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.

The government is considering a number of measures to tackle corruption such as the formation of the office of the Lokpal or Ombudsman to investigate corruption cases, the Judicial Standards and Accountability Bill, 2010 that requires judges to declare their assets, lays down enforceable standards of conduct for judges, and establishes a process for removal of the Supreme Court and High Court judges (see PRS Analysis) and the Public Interest Disclosure and Protection of Persons Making the Disclosure Bill, 2010. In 2004, following the death of whistleblower Satyendra Dubey, the government issued a notification laying down certain guidelines for whistleblowing and protecting whistleblowers.  It introduced the Public Interest Disclosure and Protection of Persons Making the Disclosure Bill, 2010 in August 2010 to give statutory backing to the 2004 government resolution.  Commonly known as the Whistleblower’s Bill, it seeks to protect whistleblowers i.e. persons making a public interest disclosure related to an act of corruption, misuse of power or criminal offence by a public servant.  It designates the Central and State Vigilance Commissions to receive disclosures from whistleblowers and lays down safeguards for protection of whistleblowers (see PRS Analysis). The Bill was referred to the Departmentally related Standing Committee on Personnel, Public Grievances, Law and Justice.  The Committee presented its report on June 9, 2011. Key recommendations of the Standing Committee

  • § The Bill seeks to establish a mechanism to register complaints on any allegation of corruption or wilful misuse of power by a public servant.  The Committee broadly agreed with the provisions of the Bill but hoped that the government would consider the recommendations and adopt them wherever found appropriate.
  • § The Bill covers any complaint under the Prevention of Corruption Act, 1988; wilful misuse of power, and a criminal offence by a public servant.  The Committee suggested that the scope of the Bill may be widened to include offences such as maladministration and human rights violations.  Specifically, the Bill should cover accrual of wrongful gain to a third party.  Also, the definition of “public servant” in the Indian Penal Code and the Prevention of Corruption Act, 1988 could be adopted for this Bill.
  • § The Committee proposed that the defence forces and intelligence organisations should be included within the ambit of the Bill.  There could be reasonable exceptions based on operational needs of the forces.  Alternately, a separate authority could be set up for these exempted agencies.  It added that the Bill should cover members of the Council of Ministers, the judiciary (including higher judiciary) and regulatory authorities.
  • § The Bill states that a public interest disclosure can be made only to the Central or State Vigilance Commissions (VCs).  The Committee is of the opinion that this may restrict access especially to population in remote areas.  It recommended that the Rules should provide for a smooth and convenient system.  The Committee added that if there are multiple points at which complaints can be made, the identity of the complainant should be strictly protected.
  • § The Bill does not allow anonymous complaints.  The Committee however suggested that if the anonymous complaints have supporting documents that substantiates the claims, the VCs can investigate it.  It also advised that an alternative mechanism could be set up within or outside the Bill for inquiring into anonymous complaints.
  • § The Committee recommended that there should be a foolproof mechanism to ensure that the identity of the complainant is not compromised with at any cost.  This is especially important because without such a mechanism it would deter prospective complainants due to fear of harassment and victimisation.
  • § The Bill allows the VCs to reveal the identity of the complainant to the head of the organisation if it is necessary to do so.  The Committee recommended that the identity of the complainant should not be revealed to the head of the organisation without the written consent of the complainant.
  • § The Committee felt that undue burden should not be placed on the complainant to provide proof to substantiate his case.  As long as he is able to make out a prima facie case, the VCs should follow up on the case.
  • § The Committee is of the view that the VCs should inform the complainant about the outcome of the complaint.  Also, the VCs should give reasons if it decides to dismiss a complaint and the complainant should be given a reasonable hearing if he is not satisfied with the dismissal.
  • § The Committee proposed that there should be a time limit for conducting discreet inquiry by the VCs, for inquiry by the head of the organisation and for taking action on the recommendations of the VCs.  The authority would have to give reasons in writing if it wants the time limit to be extended.  There should also be some mechanism to ensure that the directions of the VC are not avoided to protect the wrongdoer.
  • § The Bill states that the VCs shall not entertain any complaints made five years after the action.  However, the Committee is not convinced that this restriction should be prescribed.  If at all there has to be a time limit, exceptions should be made in case of complaints which prima facie reveal offences of a grave nature.
  • § The Committee recommended that the term “victimisation” should be defined and the whistleblower should be provided with sufficient protection to protect him from violence.  Also, witnesses and other persons who support the whistleblower should be accorded the same protection.
  • § The Committee strongly recommended that there should be a mechanism to ensure that the orders of the VCs are complied with. Stringent action should be taken against any person who does not comply with the order.
  • § The Committee felt that the penalty for frivolous or malafide complaints was too high and should be substantially reduced.  Also, while deciding whether a disclosure is frivolous, the intention of the complainant should be examined rather than the outcome of the inquiry.  The complainant should also have the right to appeal to the High Court.