Airport affairs: Regulator loses teeth on tariffs

The civil aviation ministry is likely to privatise the next set of airports on the basis of pre-determined tariffs. Opting for this route would mean that the airport regulator, Airport Economic Regulatory Authority (AERA), would not have the power to set or revise user charges for passengers as well as airlines in such cases. However, the government would consult or seek recommendations of AERA in setting such pre-determined tariffs. Thus, AERA’s role would become advisory in the case of these airports, whereas earlier it had final power in setting the tariffs.

The government is likely to invite bids for privatisation of Varanasi, Calicut, Patna, Amritsar, Bhubaneswar, Ranchi, Coimbatore, Trichy, Indore, and Raipur airports in the next round.

The changes in the AERA Act were approved by the Parliament last year. Another major change which came into effect as a result of the amendment and would apply in case of privatisation of airports is that now the airport regulator can set tariffs only for airports handling 3.5 million or more passengers a year. Earlier, AERA had the power to set tariffs for airports handling over 1.5 million passengers per annum.

Due to this change, around 17 airports are now out of the ambit of AERA’s regulation with regard to tariffs. Prior to the amendment, AERA regulated 30 airports and now can regulate only 13 airports. The other 17 will now come under the ambit of the civil aviation ministry.

However, the catch is that even for new airport privatisation projects with a capacity of 3.5 million passengers per annum, if the civil aviation ministry decides to opt for the pre-determined tariff structure, they will be out of the ambit of AERA.

These amendments will not, however, impact the tariff regulation at five of the six airports for which Adani Enterprises have won the rights to operate and maintain. Apart from the Mangalore airport, which handles less than 3.5 million passengers, tariffs at Ahmedabad, Jaipur, Lucknow, Guwahati and Thiruvanathapuram would continue to be regulated by AERA.

“Notwithstanding anything contained in sub-sections (1) and (2), the Authority shall not determine the tariff or tariff structures or the amount of development fee in respect of an airport or part thereof, if such tariff or tariff structures or the amount of development fees has been incorporated in the bidding document, which is the basis for award of operatorship of that airport,” the amended Act reads. It adds, “Provided that the Authority shall be consulted in advance regarding the tariff, tariff structures or the amount of development fees which is proposed to be incorporated in the said bidding document and such tariff, tariff structures or the amount of development fees shall be notified in the official gazette.”