The AERA Act of India
This Blog is written by SheelNidhi Sharma from Maharishi Markandeshwar University, Mullana. Edited by Ritika Sharma.
The Act provides for the establishment of an Airports Economic Regulatory Authority (AERA) to regulate tariff and other charges for the aeronautical services rendered at airports and to monitor performance standards of airports.
The Airports Economic Regulatory Authority of India (Amendment) Bill was passed on 2nd Aug 2019. It amends the Airports Economic Regulatory Authority of India Act, 2008. The Act established the Airports Economic Regulatory Authority of India (AERA). The 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.
• Earlier some private industries started operating civilian airports and they were at 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 for aeronautical services at major airports. Major airports include civilian airports with annual traffic above 15 lakh passengers.
• In 2018-19, there were 32 such airports. As of June 2019, 27 of these are being regulated by AERA. 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.
• AERA will be consulted by the concessioning authority before incorporating such tariffs in the bid document, and such tariffs must be notified.
• 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 committee had noted that AAI performed the role of airport operator as well as the regulator, which resulted in a 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.
The AERA is responsible for determining:
- The tariff for aeronautical services at different airports every five years
- The development fees of major airports
- The passengers service fee. It can also call for necessary information to determine tariffs and perform any other tariff-related functions, including amending the tariffs if necessary, in the interim periods.
The AERA will not determine:
- The tariff
- Tariff structures
- The 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.
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 to 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 AERA Act 2008 was amended on 2nd Aug 2019 after being successfully passed by both the Houses of Parliament. There were some certain changes that were made in the Act which were as followed:
• This Act may be called the Airports Economic Regulatory Authority of India (Amendment) Act, 2019.
• In Section 2 of the Airports Economic Regulatory Authority of India Act, 2008 (hereinafter referred to as the principal Act), in clause (i) for the words “one and a half million”, the words “three and a half million” shall be substituted.
• In Section 13 of the principal Act, after sub-section(1), the following sub-section shall be inserted, namely: (1A) Notwithstanding anything contained in sub-section (1) and (2), the authority shall not determine the tariff or tariff structures or the number of development fees 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 an award of operatorship of that airport.
In the first point, there is an amendment of short title and commencement. In the second point, there is an amendment to section 2 as it was necessary to make plans considering the situations that may occur in the future. In the third point, there is an amendment in section 13 to control and manage the expenditure and taxes involved by the aircraft companies.
“By an order dated 15th February 2013, this Tribunal had disposed of appeals No. 07, 08, 09, 10 & 11 of 2011 with the directions to the AERA to complete the exercise of determination of tariff. We had also directed therein that AERA would give opportunity to all the stakeholders to raise all the pleas and contentions and consider the same. We had requested the AERA to complete the determination of tariff as expeditiously as possible. In this, we had taken a view that it would not be appropriate to entertain the appeals at different stages of determination. We, thus, had expressed specifically that all the pleas could be taken before AERA while determination of the final tariff. In those appeals, Shri Nanda had specifically made a statement that all the pleas and defenses including those relating to impugned guidelines could be considered by AERA on their own merits despite the guidelines issued by AERA in appeal Nos. 08, 09, 10 & 11 of 2011.
In view of this, Shri Datar, Senior Advocate, after considerable arguments, seeks to withdraw this appeal. He, however, seeks an opportunity to file an appeal against the final tariff order. It is reported that the final tariff order pertaining to independent service providers (ISPs) has now been passed. He also seeks an opportunity to raise all the questions raised herein in his appeal for filing which, he seeks an opportunity. We allow the withdrawal with the liberty sought for by him.
Shri Datar expressed the apprehension that in case he chooses to file a fresh appeal challenging the tariff, he might be required to file all the voluminous documents along with his fresh appeal. We, therefore, direct the office that the records of this appeal shall be kept intact and at the time of final arguments, the parties would be allowed to use those records.
We had by our order dated 19th October 2011, directed that the tariff so decided in case of the three services-cargo handlings, fuel supply, and ground handling would not be implemented unless the leave is obtained from this Tribunal. In view of the disposal of this appeal, that order would stand ‘withdrawn’ and in the result, the implementation of the tariff may now commence.”
In these appeals, the original orders passed by the AERA dated 08.11.2011 in respect of DIAL and 16.04.2012 in respect of MIAL are in the challenge. However, it is pointed out by the parties now that after these orders, AERA passed two (02) other orders dated 28.12.2012 and 21.12.2012 virtually changing the chemistry of the previous orders. In that view, the parties argued before us, more particularly the respondents, state that these appeals have become infructuous as all the orders now stand merged with the subsequent order dated 28.12.2012. Even against subsequent order dated 28.12.2012, there is an appeal filed by the present Appellant i.e. Federation of Indian Airlines in the case of DIAL which is Appeal No. 03/2013. Mr. Ramji Srinivasan learned Senior Counsel also says that he intends to file an appeal against the other similar order dated 21.12.2012 in respect of MIAL also. We have already issued a notice in Appeal No. 3 of 2013. The other side requires some time to file reply-affidavit etc. The said reply-affidavit shall be filed within three weeks and there shall be one week for the rejoinder. These appeals shall be tagged with Appeal No. 03/2013.
The Appellate Tribunal at the relevant time could not take up the appeals because of vacancies in its composition and therefore, the appellant approached the Hon’ble High Court of Hyderabad through a writ petition bearing WP No. 22474/2014 to challenge the impugned Tariff Order dated 24.02.2014 and also to seek its suspension/stay. The High Court issued notices and by an order passed on 26.11.2014, it also directed the Registry to requisition/call for the records of the present appeal.
The Appellate Tribunal was also directed to send the records of this appeal which was accordingly sent within time. It may be noted that the High Court did not transfer the appeal to itself but only requisitioned the records. When the Appellate Tribunal began to function, then in the presence of learned counsel for the appellant, vide order dated 26.11.2015, it held that since the Hon’ble High Court has decided to examine the correctness and validity of the impugned Tariff Order challenged in the present appeal, the appeal has been rendered infructuous. It was disposed of accordingly.
On 23.01.2020, this Tribunal as a successor of Airport Economic Regulatory Authority Appellate Tribunal in terms of provisions in the Finance Act 2017, received a communication from the Apex Court dated 04.01.2020 disclosing the order dated 17.12.2019 passed by the Apex Court in SLP(C) Nos. 28786-28787 of 2019, arising out of a judgment and order dated 17.10.2019 passed by the High Court for the State of Telangana at Hyderabad in WP Nos. 22474/2014 and 27390/2015. The SLPs had been dismissed with an observation that the court was not inclined to entertain the petitions except to state that the matter having been remitted to the Tribunal, the Tribunal will endeavor to decide it as expeditiously as possible.
On receipt of the order in this Tribunal, the matter was given a Diary Number for expeditious listing and listed on 27.01.2020. On that date, AERA appeared through counsels. They undertook and accordingly informed the other side (the appellant). The other side also appeared when the matter was taken up again on 29.01.2019. On that date, a copy of the order of Hon’ble High Court dated 17.10.2019 passed in the two connected writ petitions noted above was produced to show that both the writ petitions stood disposed of with a direction that the Appeal No. 2/2014 is being remitted back to this Tribunal and the appellant could raise all the issues before this Tribunal.
The High Court made it clear that the interim order passed by the High Court on 06.10.2015 would remain operative till disposed of this appeal by this Tribunal. The stand of AERA as noted in the order of 29.01.2020 is that the appeal is disposed of by simply remitting the unresolved issues so that the same may be considered again by AERA while passing the Tariff Order for the Second Control Period which has already begun since April 2016 and shall expire in March 2021. On the other hand, learned counsel for the appellant sought time to bring the subsequent developments since the filing of the appeal in 2014 on record. The appellant was permitted to do so.
So far as the duty and obligation of this Appellate Tribunal to decide all issues are concerned, the submissions on behalf of the appellant fail to take note of Sections 18(4) and (6) of the Act. The Appellate Tribunal has more responsibilities as an expert Tribunal than the ordinary civil court. It is not bound by the procedure laid down by the Code of Civil Procedure, rather it is to be guided by the principles of natural justice. After hearing the parties, as per Section 18(4) it may pass such orders on an application or an appeal, as it thinks fit. Judicial orders in regulatory jurisdiction must promote justice for all the parties and all the stakeholders including the public. The Tribunal also has the responsibility under Section 18(6) to dispose of an application or appeal finally as expeditiously as possible and efforts should be to do it within 90 days.
Reasons for non-disposal within that time should be recorded in writing. It may be usefully indicated here that this Tribunal is presently having a pendency of a large number of hearing matters. There are a number of important matters requiring expeditious disposal in the overall interest of the stakeholders and the public. Therefore, it would not be in the interest of justice to keep the appeal pending for hearing the unresolved issues for an uncertain length of time. It would be a just and better course of action to remit the limited number of surviving issues for fresh consideration and adjudication by AERA, which is directed to act accordingly.
Before parting with the appeal, it is deemed useful to remember that the work of the Regulatory Authority is almost continuous in nature and Consultation Paper is issued only to invite the comments and responses of the stakeholders. Such papers cannot be treated in law as the final stand of the Regulator because Consultation Paper by itself cannot have any adverse effect upon the rights of the Airport operator or the other stakeholders including the Airlines.
It is for this reason that Appellate Tribunal has to ensure that the expertise of the Regulator is not hindered unnecessarily due to interim interventions. The above order, in the considered view of this Tribunal, will facilitate the Regulator (AERA) in carrying out its statutory task with an expedition in a more effective and meaningful manner. While deciding the remitted issues AERA should keep its views open so that the issues are decided fairly and in accordance with the law without any prejudice on account of the earlier litigation or this judgment and order.
The appeal is disposed of accordingly without any order as to costs. As a result, the interim orders will stand vacated. Of course, it will be open for AERA to issue interim/ad hoc orders or directions for the purpose of regulating UDF as an interim measure till another Tariff Order is issued in regular course with due expedition and in accordance with the law.
The analytical report on the matter of AERA Act is very crystal clear as this Act was made to suppress the monopoly of the airline companies. This Act also divides the airports into two categories that are major airports and minor airports. A major airport is one that has more than 30 lakh passengers in a year and a minor airport is one that has 15-30 lakh passengers in a year. Only the airport having passengers of more than 30 lakh that are major airports will fall under AERA Act.
From the above facts and the statement provided it clear that the reason behind implementing this act was very lawful and just. It is due to this act that airline companies do not follow the monopoly and remain under the surveillance of the government. The difference between the two kinds of airports was brought by this Act.
(3) Indian Kanoon
(4) Supreme Court Cases
(5) Airports Economic Regulatory Authority of India (Amendment) Act, 2019