Vol. 2, Issue 5 (2015)
Airport Privatization and Economic Regulation: An Indian Experience
Author(s): D.P. Singh, Narendra N. Dalei, T.B. Raju
Abstract: Airports are designed and developed to support and provide infrastructure facilities to airlines. Since many decades, the airports remained as natural and public monopolies with large economies of scale. Only recently and after the corporatization and privatization, airports come under economic regulation. Particularly, during last few decades the nature of the airport industry has undergone a drastic change. The business and commercial objective with profit/ revenue maximization in a corporate frame work have been adopted by almost all airports worldwide including Indian airports in particular. Regulating the profit maximization objective and increasing the efficiency, various effective regulation and different types of privatization have been dynamically encouraged by public authority with the informed and planned aim of increasing social welfare. Thus majority of privatized airports come under economic regulation with the objective of improving efficiency and augmenting social welfare during recent decades. India is not exception to the above trend and the major six airports viz. Mumbai, Delhi, Bangalore, Hyderabad, Cochin and Nagpur have been privatized under PPP (Public Private Partnership) mode between 2000 to 2009. With the onset of privatization, Airport Economic Regulatory Authority (AERA) was established by an act of Parliament in 2008 for economic regulation of Indian Airports. With this background, this paper deliberates in detail the various regulatory approaches adopted by AERA since May 2009.