Aviation ministry to push for passage of amended AERA Act
With the monsoon session of Parliament failing to enact the proposed changes to the AERA Act, which would have allowed the government to bid out new airports allowing predetermined tariffs, the civil aviation ministry is also exploring other options, including an ordinance, to effect the change.
In a potential incentive to investors, the civil aviation ministry will seek parliamentary passage in the winter session for an amendment to the Airports Economic Regulatory Authority (AERA) Act that will allow private airport operators to charge predetermined tariffs
The amendment is aimed at attracting investors to construct and operate airports. Currently, private airport operators have to approach AERA for permission to revise charges such as user development fee, passenger security fee and landing and parking fees.
AERA is an independent regulator that sets the tariffs charged by major airports; once the amendment is passed, airport charges will be predetermined, offering investors greater revenue certainty, and will change in step with market parameters such as inflation..
“We expect the bill to be cleared in this session which will allow predetermined tariffs for airports,” minister of state for civil aviation Jayant Sinha said. The winter session of Parliament will begin on Tuesday.
With the monsoon session of the Parliament failing to enact the proposed changes to the AERA Act, which would have allowed the government to bid out new airports allowing predetermined tariffs, the civil aviation ministry is also exploring other options, including an ordinance, to effect the change.
The government introduced the bill in the Lok Sabha in July. Apart from predetermined tariffs, the government has also sought a change in the definition of major airports. The Act defines a major airport as a civilian airport with annual passenger traffic of over 1.5 million. The bill increases the threshold to over 3.5 million.
Last month, the cabinet cleared a proposal to allow airports in six cities – Ahmedabad, Lucknow, Guwahati, Jaipur, Thiruvananthapuram and Mangaluru – to be developed and managed through the public private partnership (PPP) model on the lines of the Delhi, Mumbai, Hyderabad and Kochi airports.
“...we have always been committed that we are going to take our larger airports and actually put them in the private sector that is privatising those airports. We have tried a few different models for that and I think now, we are clear that we want to go to a full PPP model, like Delhi and Mumbai, where the entire airport is within the scope of the concessioner agreement...And all aeronautical and non-aeronautical revenue will accrue to the concessioner,” Sinha told Hindustan Times in an interview in November.
“All the greenfield (new) airports are going to be PPP by and large. Brownfield (existing) airports to the extent that they are attractive and to the extent that we can get sufficient interest from private sectors.., we will continue to push ahead our privatization effort,” Sinha had said.
India has 31 major airports that handle more than 1.5 million passengers a year. Once the threshold is increased to 3.5 million, the number of airports where tariff will be regulated by AERA will come down to 15.
“Private airports are going to be the future as past experience shows that they are better managed. It’s good that tariffs will be decided as per markets dimension, and operator will not have go to the regulator all the time,” said Mark Martin, founder and CEO of Dubai-based Martin Consulting.