Annexure II - AERA

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1. Introduction
ICAO PRINCIPLES AND REGULATORY TILL
; ;
I I March 201 I
In January 2011, AERA has published the Order No, 13/20 I0-11 (hereinafter, the 'Order'),
which prescribes that the regulatory approach to set aeronautical charges in the major airports of
India is a single till price cap regulation. In the Order, AERA justifies the adoption of a single till
regime for all airports in India by stating that:
"The current ICAD airport charging policy specifies the costs ofan airport that
should be charged to airport users, explicitly including therein contributions from
non aeronautical re venues. [. ..] ICAD encourages contribution from non
aeronautical revenues towards aeronautical charges. [...] Regarding cost
relatedness, ICAD clearly states that non aeronautical revenues are generated by
passengers and hence they should benefit from the non aeronautical surpluses.
[. ..] It is, thus, clear from harmonious construction that ICAD guidelines indicate
that non aeronautical revenue should be either used for funding investment needs
(capex) ofaeronautical activities or to defray aeronautical charges'. I
The general regulatory framework defined by AERA in the Order - based on a single till price
cap regulation - applies to the GMR Hyderabad International Airport Limited.
GMR Hyderabad International Airport Limited (HIAL) has decided to appeal under Section
18(2) of the Act against the AERA's Order on the ground that a single till tariff structure proves
to be inapplicable to HIAL airpolt, because of the incompatibility of such regulatory till
approach with provisions of its OMDA. In this context, HIAL has asked us to provide an
assessment ofprinciples endorsed by ICAO in terms of regulatory till applicable for the
economic regulation of airports and to provide evidence of regulatory approaches adopted in
other jurisdictions, and draw some conclusions.
This Memorandum is organised as follows:
AERA (201 J), Ord er No. 1312010-11, In Ihe MeuerolReguletory Philosophy and Approach In Economic Reguletton of
Airports Operators, par. 5.17 , 5.18, 5.19 and 5.24.
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Annexure II-B
CP No. 9/2013-14/T-12023(14)/1/2012- Tariff- Vol - III Annexure II-B Page 18 of 51