Annexure II - AERA

NERA
Economic Consult ing
5. Conclusions
Article 13 of the Act requires that AERA determines "the tarifffor the aeronautical services
taking into consideration [.. .] the concession offered by the Central Government in any
agreement or memorandum of understanding or otherwise". 18
The HIAL Concession Agreement prescribes that only aeronautical charges will be regulated
(namely, Landing, Housing and Parking charges, Passenger Service Fee and User Development
Fee) consistently with ICAO Policies (see Clause 10.2.1 and Schedule 6 of the RIAL Concession
Agreement).
The Act requires regulation to be put in place such to allow economic viability of airports and to
be coherent with the agreements between each airport and the Central Government. Therefore,
the regulated tariffs of RIAL should set such to allow economic viability and by taking into
account the specificities of each airport, including the fact that RIAL pays an annual
contribution (expressed in terms of a percentage of gross revenues) as a result of the
privatization process.
On the contrary, the AERA's Order of 12 January 2011 prescribes that the regulatory approach
in the major airports of India has to be a single till price cap regulation, since, according to
AERA, a single till regime is the solely approach that may be regarded as consistent with ICAO
policies and guidelines. '
We believe the AERA interpretations of ICAO principles not to be appropriate. By making an
erroneous reference to the fact that single till regulation is recommended or supported by ICAO,
AERA does not make a reasonable case to support the adoption of a single till price cap
regulation to major airports and more specifically to HIAL airport.
Differently, we have assessed the principles endorsed by ICAO, which deal with the scope of the
regulatory till and on how non-aeronautical revenues should be considered in setting aeronautical
charges. Our conclusions are that ICAO policies do not indicate a unique approach to be
regarded as more appropriate to regulate aeronautical charges. As consequence, neither single till
nor dual till or hybrid till are recommended or supported by rCAO.
ICAO guidelines envisage that the appropriate regulatory till should be defined case-by-case on
the basis of characteristics and peculiarities of the single airport. The approaches suggested by
rCAO range from a single till to a dual till, with the possibility of intermediate solutions (i.e. a
hybrid till).
1M AERA (2008), The Altports Economic Regulatory Authority ofIndia Ac/. 2008.
Annexure II-B
CP No. 9/2013-14/T-12023(14)/1/2012- Tariff- Vol - III Annexure II-B Page 26 of 51
9