The bill amendment enables the awarding of airport contracts on the basis of pre-determined tariffs.

India aviation

By Patrick Appleton

India’s decision to lessen the powers of its Airports Economic Regulatory Authority (AERA) has been met with criticism from the International Air Transport Association (IATA).

In a blog post on the IATA website, Amitabh Khosla, Country Director, IATA India said the AERA (Amendment) bill “is not in the interests” of passengers, airlines or the Indian government.

The bill has changed the definition of a “major airport” in India, from those serving 1.5 million passengers per annum to 3.5 million. The move lessens AERA’s remit, removing key airports such as Amritsar and Nagpur from its auspices.

In addition, the amendment enables the awarding of airport contracts on the basis of pre-determined tariffs.

Pre-determination could lead to a situation in which consumers are excessively charged for the services being offered

Khosla said such a move deviates from the basic International Civil Aviation Organization principle that there should be a relation between costs and charges.

“Pre-determination could lead to a situation in which consumers are excessively charged for the services being offered,” said Khosla.

He added that the move means charges yield will have “no correlation to capital investments in the airport” and that the operator has “limited incentives to make appropriate investments” to benefit consumers.

“Without appropriate construction and development KPIs being in place, the airport operator would be incentivized to limit capital expenditure to maximize returns on the back of ‘pre-determined’ tariff,” Khosla said. 

“This is not in the interests of passengers, airlines, or the government.”

AERA’s tariff orders in recent years have helped reduce charges in Delhi and Bangalore, among others, compared to the charges proposed by the airport operators.

Khosla said that although AERA has had problems which have undermined its role—such as an increase in litigation and frequent swings in airport charges—the regulatory authority has been a force for good.

IATA India’s Country Director added that the government should be focused on strengthening AERA, rather than lessening its powers, as Indian aviation continues to grow.

“A stronger and independent airports economic regulator is vital for realizing the Government’s vision of building new airports over the next decade – and for India’s emergence as the 3rd largest aviation market in the world,” he said.

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