The article is written by Naman Sherstra, from the Department of Law, University of Calcutta. The role of the Airport Economic Regulatory Authority, its functions and criticism are discussed in the article.

Introduction

India is the third-largest aviation market in the world with passenger traffic of 144 million recorded in the year 2019. Between the decade of 2007 to 2017, the total number of airports doubled from 12 to 27 in India. With the rising number of air passengers, there was a need for an authority which would regulate the tariff for the aeronautical services, while serving the interests of the passengers and airline companies. The Airport Economic Regulatory Authority Act was enacted by the government, in the year 2008, to establish a regulatory authority called Airport Economic Regulatory Authority (AERA) that controls the tariff for rendering the aeronautical services to the airlines, and serving the interests of passengers and airlines at the airport. The major airports having the capacity to handle 3.5 million passengers per annum come under the regulation of this Authority. Their power and functions are directly controlled by the AERA, working under the Government of India.

Airport Economic Regulatory Authority 

The Airport Economic Regulatory Authority is an independent statutory body constituted under the AERA Act, 2008. The authority regulates the tariff for rendering the aeronautical services to the airlines. It works for the interest of the airline companies as well as the passengers travelling by air.

Salient features

The tariff regulation for the aeronautical services rendered by the AERA, under the Act, includes navigation, surveillance and communication support, landing, housing and parking of aeroplanes, cargo and fuel supply facilities to the airlines for their smoother operation. Earlier, the authority used to control the tariffs of all the private and leased airports, civil enclaves, and the major airports. India had 32 major airports that came under the regulation of AERA. However, after an amendment in the Act, the tariffs of major airports having the passenger traffic of 35 lakh per annum shall be regulated by the AERA. Subsequently, only 16 airports are to be directly controlled by the AERA, while rest of the 17 and other private airports shall be directly controlled by the Ministry of Civil Aviation.

The term “service provider” under the Act means a person or the authority who provides aeronautical services and is eligible to charge the development fees from the embarking passengers. The Airport Management Authority shall also be covered under the ambit of “service provider”. The term “stakeholder” includes a licensee of the airport, airline companies, and the association representing the passengers or the cargo facility users.

Composition of the Authority

• The Airport Economic Regulatory Authority comprises a Chairperson and two other members that shall be appointed by the Government of India. 
• The persons of ability and integrity, having adequate knowledge and professional experience in aviation, law, economics, commerce, and consumer affairs shall be considered for the post of Chairperson and members of the Authority.
• The Selection Committee constituted by the Government of India shall recruit the Chairman and members of the Authority.
• The Chairman and the members shall hold the office for the period of five years with the retirement age of 65 for the Chairman and 62 for that of members.
• The salary and allowances payable to the Chairman and the members shall be prescribed by the Central Government under the Act.
• If AERA is involved in the matter of civil enclave in defence airfield, an additional member shall be appointed for this purpose. The member, nominated by the Ministry of Defence, shall not be below the rank of Secretary of the Government of India.

Power of the Authority

• Under Section 14 of the Act, the Authority has been empowered to conduct an investigation and order the “aeronautical and airport service provider” to furnish, in writing, the explanation of its functions with regard to its performance.
• Under the said Section, the Authority can appoint one or more persons to inquire about the work affairs and direct its officers to look into the accounts book and other related documents of the service provider.
• If the service provider is a government department, the Authority shall inspect each of its offices and the department is bound to furnish all the account books and account related statements before the Authority on demand.
• If the service provider is a firm or company, every person related to the company or firm including the director, partner, manager, and secretary shall have to furnish the account book details, and statement details before the Authority on demand. The authority can inspect every member, including the aforementioned persons, if it is required.
• The Authority has the power to direct the service provider with regard to its performance and proper functioning.
• Under Section 16 of the Act, the Authority has the power to inspect any building or place, if it believes that any kind of document related to the subject matter can be found in the said place. On finding such a document, the Authority may seize, extract, or make copies of the document. The seizure shall be made under the provisions of Section 100 of the Code of Criminal Procedure, 1973.

Functions

Section 13 of the Act provides the functions of the Authority concerning major airports, determining tariff for the aeronautical services etc. The considerations of the services for determining tariffs shall be-

• The capital and timely investment in the improvement of the airport facilities.
• The quality and the relevant factors of services provided at the airports.
• The cost incurred for the sake of improving efficiency, and the economic as well as viable operations of the major airports.
• The collected revenue from sources other than aeronautical services.
• Any kind of concession offered by the Central Government in agreement or Memorandum of Understandings.

The determination of tariff in respect of all the aforementioned considerations may be different at different airports.

• The Authority shall determine the development fee and the amount of passenger fee with regard to the Airport. The passenger fee shall be levied under Rule 88 of the Aircraft Rules, 1937.
• The determination of the tariff shall be done once in a period of five years. However, the Authority may amend it from time to time between this period, if it finds appropriate and in the public interest.
• The Authority shall maintain transparency while discharging its functions and escape from acting in a way that threatens the sovereignty, security, and integrity of the State along with the friendly relations with foreign states, public order, and morality.

Settlement of AERA disputes under Appellate Tribunal

Appellate Tribunal

Under Section 17 of the Act, there shall be an appellate tribunal for the adjudication of any kind of AERA disputes. “The Telecom Disputes Settlement and Appellate Tribunal”, constituted under Section 14 of the Telecom Regulatory Authority of India Act, 1997, shall be considered as the appropriate authority for the adjudication of disputes arising under the AERA Act. The disputes arising among the service providers, and a group of consumers, involving individual orders, monopolistic and unfair trade practice, the eviction orders shall be adjudicated before the aforesaid tribunal.

The Central and State Government, local authority, or even an individual can approach the appellate tribunal for the settlement of disputes. The aggrieved parties shall have to reach before the tribunal for appeals within the 30 days of an order made by the AERA. However, the tribunal has the power to exempt such conditions if it believes that the delay in the application was caused due to sufficient reasons.

The tribunal shall have to try to dispose of the matter expeditiously within 90 days from the date of application, and serve the copy of the order to both of the parties involved in the dispute. However, in case of delay in adjudication, the tribunal shall show the reason for such delay in writing to the parties.

Power of the tribunal and appeals made to Supreme Court

The appellate authority has the powers of summoning, inquiring, and receiving evidence on affidavits, review, and dismissal of the application. Such power is vested under the Code of Civil Procedure, 1908. For the purpose of requesting any public record or document from office, the provisions of Section 123 and Section 124 of the Indian Evidence Act, 1872  shall be applicable.

The proceedings before the appellate tribunal shall be similar to the judicial proceedings and for such purpose, the tribunal shall be deemed as the Civil Court. Under Section 32 of the Code of Civil Procedure, 1908, the tribunal has the power to execute any of its orders like the Civil Court, by transmitting it to the local jurisdiction.

Under Section 31 of the Act, aggrieved parties can move to the Supreme Court against the order of the appellate tribunal under Section 100 of the Code of Civil Procedure, 1908. The appeal has to be filed within 90 days of the tribunal’s order. However, the court can exempt if it believes that there is a reasonable ground for the delay in filing an appeal. 

Provisions of finance and account

The AERA shall prepare its budget for the upcoming year with the estimated expenditure receipts and accounts, furnishing it before the Central government. The Central Government shall grant the funds to the Authority for the payment of salary and other expenditures of the Authority after an appropriation made by law in the Parliament.

The accounts and all relevant statements of the accounts have to be maintained by the Authority. The Comptroller and Auditor General of India have the power to audit the accounts directly or by its officials and forward the report to the Government of India. The Authority has to furnish all the relevant account statements and returns, before the Central Government, on-demand.

Provisions of offences and penalties

If any person, willfully, fails to comply with the order of the Appellate tribunal, then such act shall attract punishment with a fine of one lakh rupees. On the subsequent offence, the fine shall extend up to 2 lakh rupees. If the person continues to contravene the order, then such offence shall be punishable with a fine of 2 lakh rupees per day till the day he stops contravening.

If a person fails to comply with any provision of the Act, then such person shall be punished with a fine of 1 lakh rupees. On a subsequent offence, the fine shall be 2 lakh rupees which may increase up to 4 thousand per day and continue till the date of default if the contravention is repeated. If a similar offence is committed by companies or the government officials, then the responsible officers and the members of the company and government offices shall be punished according to the provisions of the Act.

Power of Central Government under the Act

The Central Government has been vested with enormous powers under the AERA Act. Ranging from the appointment of the officials of the Authority to the regulation of funds, there are several aspects which are regulated by the Central Government under the Act.

Under Section 42 of the Act, the Central Government has been empowered to issue directions to the Authority with respect to the sovereignty, integrity, and security of India, friendly relations with other states, public morality, and decency.

Under Section 49 of the Act, the Central Government has been empowered to supersede the Authority, if it believes that, in a situation of a grave emergency, the Authority is unable to discharge its duties or comply with the directions of the Central Government.

In case, the Authority, while discharging its functions, is found to have acted in the way which has deteriorated its financial position, or that of the administration or the aeronautical services at the Airport, the Central Government can supersede it. On supersession, the official members of the AERA shall have to vacate their offices, and the functions or the power of the Authority shall come directly in hands of the Central Government. 

With respect to salary and allowances of chairman and other members of the Authority, its power and functions, performance, and account statement related functions, the Central government has the power to make rules under the provisions of the Act by issuing a notification in the Official Gazette. However, such rules need to be presented before both the Houses of the Parliament and shall be enacted after being passed by both the Houses.

Recent amendments in the Act

The exponential growth in the airline market and the entry of private airlines in the past decade, made the government amend the Act in 2019. The Airport Economic Regulatory Authority (Amendment) Act 2019, was passed by the Parliament in the year 2019 making few amendments in the original Act. The sudden increase in the number of private airports and airlines put tremendous work pressure on the Airport Economic Regulatory Authority. It was quite difficult to determine the tariff after the engagement of the private companies in the airport administration and the airline business.

The amendment was made in the definition of “major airports” under Section 2 of the principal Act. Under the amendment, the passenger holding capacity of the major airports has been changed. Now the airports having annual passenger traffic of 3.5 million per annum shall come under the definition of the major airports, which earlier used to be 1.5 million per annum.

The second major amendment was made under Section 13 of the principal Act. After the amendment, the AERA shall not regulate the development fees and the tariffs in certain cases. Such cases shall include matters where the tariff amount was decided through bid and the operation was awarded based on such biddings. The concessional authority will consult the AERA before incorporating such tariffs in the bid document and notifing such tariffs.

Criticism received

The recent amendment in the Act has been criticized due to the clipping of power wings of the Airport Economic Regulatory Authority. The non-major airports shall now be regulated directly by the Ministry of Civil Aviation. The trend of privatization of the airports is high, except for the private and non-major airports, only 10 major airports shall fall in the basket of Authority. The amendment has emasculated the role of AERA as a regulator because a major realm of the airport is outside its regulation. According to International Airport Transport Regulation, the tariffs need to be regulated by an independent regulatory body like AERA, because the privatization of airports may monopolize the system and impose upon the airlines arbitrary tariffs since they are in the dominant position of negotiation. Such implications may hamper the regulation system and harm the financial market of the airline companies, making a hole in the passenger’s pocket. India has a bright future in the airline business and for such purpose, a robust regulatory mechanism is needed.

Conclusion

The Airport Economic Regulatory Authority is a regulatory body working under the domain of the Government of India. The AERA Act perfectly deals with the powers, functions, and composition of the Authority. However, after the amendment, the Government of India has reduced its ambit of power and made it limited up to certain major airports. Such a step of the government is unhealthy for the future of the stakeholders and the service providers. The increase in the private-owned airports has endangered the existence of the “AERA” as being a regulatory body as the majority of airports stay unregulated by the body. The government needs to rethink the excluding policy of the “non-major” airports out of the regulatory power of AERA. There needs to be an independent regulatory body for all airports, whether private, major or non-major working under the Government of India. It will bring fairness and transparency to airport operations.

References

• https://theleaflet.in/a-threat-to-the-aviation-industry-the-aera-amendment-act-2019-weakens-the-regulatory-body/
• https://www.thehindu.com/opinion/op-ed/new-models-for-airport-management/articl e2 4522971.ece

---

LawSikho has created a telegram group for exchanging legal knowledge, referrals and various opportunities. You can click on this link and join: