The era of AERA in India’s airports

The Airport Economic Regulatory Authority (AERA) has recently been constituted to regulate tariff and other charges for aeronautical services and to monitor performance standards of major airports in India. AERA’s role as the regulator for airport charges will be significant in encouraging private participation in the airport sector and bringing efficiency in investments in airports.

Airport charges are generally fixed by regulators around the world either by defining a cap on the increase in charges during a particular regulatory period or by regulating the level of charges to ensure that the developer recovers its cost and is guaranteed a reasonable return on its investment. Regulators in some countries, e.g. New Zealand and Australia, maintain restraint in interfering with airport business and act as monitoring agencies to ensure that airport charges are fixed by the airport operator in a reasonable manner, which does not result in abuse of its monopoly. A consultation paper issued by AERA recently shows its inclination to adopt a price cap method for fixing airport charges.

It will perhaps be a good idea for AERA to adopt a light-handed approach towards regulation where charges for non-competitive services (e.g. landing and parking charges) are fixed by AERA while allowing the charges for competitive services (e.g. cargo handling) to be determined by market forces.

Sakya Singha Chaudhuri is a counsel in the Delhi office of Trilegal. Trilegal is a full-service law firm with offices in Delhi, Mumbai, Bangalore and Hyderabad. The firm has over 120 lawyers, some of whom have experience with law firms in the US, the UK and Japan.