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Union Cabinet recommends setting up ombudsman to regulate airport tariffs news
01 September 2008

Concerned about charges of irregular pricing by airport operators, the government took the first steps towards regulating the sector by approving amendments to the Airports Economic Regulatory Authority (AERA) of India Bill, 2007, on Friday at a Cabinet meeting presided over by Prime Minister Manmohan Singh.

The Bill is now expected to be introduced in the forthcoming session of the Lok Sabha. The regulatory body or ombudsman proposed by it will be set up within three months of getting clearance from the House.

This would make it the second major piece of legislation to be debated upon in October after the new Companies Bill. (See: New Companies Bill to be introduced in Parliament in October)

According to the Bill, AERA shall determine airport tariffs, which include landing and parking charges, housing charges, navigation and surveillance charges apart from user development fees. The charges would be fixed on the basis of performance standards of the airports, whereas most of them currently are fixed by the airport operator.

The Bill was introduced before the Lok Sabha on 5 September last year and thereafter referred to the Parliamentary Standing Committee on Transport, Tourism and Culture.

The panel wanted the authority's functions to cover all airports across the country, irrespective of their size or ownership. The government fully accepted four recommendations and partially accepted two, including the one on fuel infrastructure at the airports.

It decided to partially accept the recommendation on inclusion of non-aeronautical revenue within AERA ambit. Charges for core services such as landing, parking, communication, navigation and air traffic control are the monopoly of the airport operator. Non-core services like office space, car parking and food denote non-aeronautical services.

The Cabinet felt while non-aeronautical services should not be regulated per se, the revenue generated from them ''may be taken as a factor relevant for determination of charges,'' the spokesperson said. This would help to moderate aeronautical charges through ''maximisation of non-aeronautical revenues.''

However, the government said the revenues earned from these services, which went to the airport's overall account, would be included while fixing the aeronautical charges. The ministry has also included ground handling and cargo-related services under the ambit of AERA.

At most of the airports, more than one oil firm supplied aviation turbine fuel (ATF) and they paid a throughput charge to the airport operator at mutually negotiated rates. Visualizing greater competition among the ATF suppliers and optimal utilization of the fuel supply infrastructure, the Cabinet felt that a common supply network should be developed at the airports.

Like the Telecom Regulatory Authority of India (TRAI), the AERA would seek to set quality standards and ensure a level-playing field for all airport operators, including those in the private sector.

The Cabinet, however, refused to accept the suggestion of bringing all airports under the ambit of AERA. It retained the clause in the Bill that says that only airports handling over 1.5 million passengers should be brought under AERA. As such eleven airports came under the ambit of the proposed regulator.

The government said that since the eleven airports that will come under AERA accounted for 85 per cent of the total traffic and revenue in the country, including other airports would make the regulation a cumbersome process.

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Union Cabinet recommends setting up ombudsman to regulate airport tariffs