AERA's Crucial Role in Development of Aviation in India

AERA, established as per AERA Act 2008 passed by parliament, was formed to regulate tariff and other charges for aeronautical services rendered at ‘public airports’. Para 2 (a) of AERA Act lists all the aeronautical services at a public airports, whether operated by Airport Authority of India (AAI) or under Public-Private Partnership (PPP) model. In fact, formation of AERA, as Airport Economic Regulatory Authority, was conceived by the government only after participation of private companies was envisaged with the aim to fast-track development of major public airports in India to meet the ever growing domestic and international traffic. It remains a matter of grave concern, to Indian public at large and aircraft operator in particular, that in spite of being well-defined many critical aeronautical services are still not been fully regulated by AERA, as per the ‘Act’, even after being in existence for over seven years now. Indian government’s recent push for remote/regional connectivity, to boost the economy, would only be optimised if corrective action is immediately taken and the full spectrum of aeronautical services at public airports get regulated by AERA as per broad guidelines given in State Support Agreement (SSA) signed by Ministry of Civil Aviation (MoCA) with the operators of major public airports functioning under PPP model. It would be worth elaborating on some of the key issues regarding levying of aeronautical charges, at public airports, as of now.

GH Services. Ground Handling (GH) services are well-defined aeronautical services at an airport as per para 2 (a) (iv) of AERA Act. Therefore, in addition of being so defined in AERA Act 2008, government further issued AIC 3/2010 on ‘grant of permission for providing GH services at airports, other than those ‘controlled by AAI’. The 3/2010 lists out all the GH services to be provided at Annex A&B. The AIC 3/2010, para 1.1 (iii) and AERA Act 2008, para 2 (a) (vii), also give Central Government authority to additionally specify any activity, it considers, should be part of aeronautical services at public airports. While ‘self-management of GH services’ remains the right of each operator whether scheduled or non-scheduled, AERA being the regulatory authority, has to decide charges for aeronautical services at all public airports as per guidelines given in SSA, specifically for PPP model airports. There is no provision of any royalty to be considered by AERA while deciding charges for aeronautical services at any public airport. ‘Royalty’ is a legacy of British India and used to be called ‘Lagaan’ during pre-partition times. Even the dictionary meaning of ‘Royalty’ disqualifies it to be part of costing at a ‘public airport’. ‘Royalty has been specifically defined, in accounting terms, as ‘payments made to someone whose invention, idea of ‘property’ is used. Therefore, at public airports charging royalty, over and above charges for aeronautical services, is illegal, unethical and, akin to fleecing, in monopolistic situation, of common man in India travelling through medium of air. All operators, whether scheduled and ‘non-scheduled’ pass on these illegally charged amounts of ‘royalty’ to the common public, which is using air transportation as means to commute to save their time and better use their skills in more progressive way for growth of Indian economy. Quite clearly, illegal charging of ‘royalty’ adds up to the cost of air tickets and would adversely affect optimum growth of Indian aviation industry. It needs to be further noted that variable royalties being charged by different ‘GH’ Agencies across public airports in India. Even AAI has region-wise variable rates of royalty at public airports operated by it. In case of ‘public airports’, operated under PPP model, AERA has so far given free run to all airport operators to follow any model of own choice-‘royalty’ or ‘revenue sharing’. And, this model is being allowed by AERA in addition to the ‘rental or licence fee’ for using the premises, of airports for ground services that are part of aeronautical services, as provided in Operations, Management, Development Agreements (OMDAs) signed by four PPP model ‘major airport operators’ with AAI. The ‘AERA Act’ makes it obligatory on part of AERA to fix charges of all aeronautical services at a public airport on ‘cost plus basis’ as provided in SSA, including Independent Service Providers ( ISP’s) giving cargo facility and ‘supply of fuel’. SSA also provides that, once the charges are fixed in a rational / ‘cost-plus’ basis, 14-15 per cent returns are allowed on investments at all major public airports, whether, AAI or ‘under PPP’. Therefore, it is obligatory on part of AERA not to allow charging of any amount above the AERA’s prescribed ceiling to the general public, whether it is Airport Operator/ISP/Aircraft Operator. It may be left to the airport operator to provide these essential aeronautical services under own ‘safety certified’ arrangements or, thru accredited GH Agencies by any of the three – ‘Revenue Sharing/‘Licence Fee’/‘Mixed Revenue sharing & Licence-Fee’ - mechanism. This is the only way AERA should be discharging its responsibilities to ensure Indian public pays reasonable and the right charges for all aeronautical services provided at public airports.

Maintenance Hangars under DGCA’s approved CAR 145 at Public Airports. Besides GH charges, AERA has to urgently address the issue of uncontrolled rentals/‘licence fee’ of maintenance hangars at a public airport functioning under CAR 145 approvals given by DGCA. The ‘licence fee’/rental of these maintenance hangars, providing aeronautical services as per AERA Act para 2 (a) (ii) for ensuring ‘continuous airworthiness’/‘safe flying’ operations of aircraft at a public airport, has to be fixed by AERA in accordance with the Act & OMDA Annex 5. Besides, giving free hand to airport operators (both AAI & under PPP) for fixing ‘licence fee’ as non-aeronautical charges, AERA has, further, not even stopped charging of ‘royalty’ in addition the licence fee at many of these public airports. The ‘licenced fee’ of these maintenance hangars has been astronomically increased without any justification since these major public airports started function under PPP model from the year 2006 onwards. These rentals/‘licence fee’ has increased more than three times or 300 per cent, without any additional services, whatsoever.

In view of the above, while addressing issue of royalty for GH, AERA should immediately fix ‘license fee’/‘rentals’ for maintenance hangars at all ‘public airports’ as per provisions of AERA Act and completely remove additional fee/charges under any head, like ‘royalty’ or ‘revenue sharing’ etc., being charged, hitherto.

Finally, AERA should be complimented for its recent efforts to bring out the Consultation Paper, 8/2016-17, as part of its public duty to ensure all aeronautical services at public airports are charged reasonably and on cost-plus basis. No further time should be allowed to lapse to correct the situation and, ‘royalty’, which is the legacy of British India, be abolished completely and instantaneously.

AERA’s Consultation Paper, 8/2016-17, relates to capping of Royalty at 30 per cent. Indian public, as part of its rights in independent India, should strongly contest the very existence of Royalty because it is illegal, unethical, and prejudicial. Further, it runs counter to the functioning of AERA as the sole regulator of aeronautical charges at public airports in India. All those working for optimum growth of aviation industry in India would strongly questions the recent trend of ISP’s changing the word ‘Royalty’ to ‘Revenue Share’, indicating an underhand attempt to force upon the illegal charges under different nomenclature. The issue of rationalising all aeronautical charges and abolishing royalties have been amply stated in the union cabinet approved National Civil Aviation Policy (NCAP) 2016. It is the time to stop procrastinating and put Indian aviation on a sustainable growth trajectory.