Airport privatisation gets a fillip as Lok Sabha passes AERA bill

Move to club smaller loss-making AAI-run airports with larger ones being done as it was felt privatising larger airports would leave AAI with only small loss-making airports

The Lok Sabha on Thursday passed the Airport Economic Regulatory Authority (AERA) Amendment Bill paving the way for privatisation of a small loss making airport by clubbing it with a larger airport.

The amendment bill was introduced by civil aviation minister Jyotiraditya Scindia and passed amid din in the lower house. It proposes to modify the definition of a major airport under the AERA Act 2008 and will have to be passed by the Rajya Sabha for the amendment to come into effect.

The move to club smaller loss-making Airport Authority of India (AAI)-run airports with larger ones is being undertaken following criticism of the existing policy. It was felt privatising larger airports would leave AAI saddled with only small loss-making airports.

The government has already decided to privatise AAI airports at Amritsar, Varanasi, Bhubaneshwar, Indore, Raipur and Tiruchirapalli, but is yet to finalise smaller airports that can be paired with them for disinvestment. Government sources say the airports would be paired in such a way that it brings operational and financial synergies for the bidder.

According to Poonam Verma, partner, J Sagar Associates, the bill proposes to amend the definition of “major airport” under Section 2(i) of the Airports Economic Regulatory Authority Act, 2008  to include ‘a group of airports’ in place of ‘any other airport’.

"The purpose of this amendment is to pair the smaller non-profitable airports with profitable airports as a combination/package to bidders to make it a viable combination for investment under PPP mode. This move is also likely to help in expanding the air connectivity to relatively remote areas and as a result, expediting the UDAN scheme. The amendment will allow AERA to regulate tariff and other charges for aeronautical services for not just major airport with annual passenger traffic of more than 3.5 million, but also a group of airports together," she said.

Currently the airport sector regulator determines tariff of a single airport and the amendment will allow for tariff fixation of more than one airport.