Traditionally, most of the Airports in India were under ownership and control of the Government of India. In 1997, the Government of India formulated Airport Infrastructure Policy, which provided for private sector’s participation for improving quality, efficiency and increasing competition. As a result of this initiative, Greenfield airports in Public-Private Partnership came up in Bangalore and Hyderabad. This trend indicated growing competition and a requirement of level playing field amongst different categories of airports in future. The Airports Authority of India then performed the role of airports operator as well as the regulator, which resulted in conflict of interest.

Thereafter the Government of India set up Naresh Chandra Committee to prepare the road map for civil aviation sector. The Committee recommended for setting up of an independent regulatory authority. In order to implement the recommendations of the Committee it was felt that an independent economic regulator may be established. Accordingly, the Airports Economic Regulatory Authority Bill, 2007 was passed by the Parliament in 2008 and received assent of the President on December 5, 2008. The Airports Economic Regulatory Authority Act, 2008 (27 of 2008) came into effect on January 1, 2009 except Chapter III and Chapter VI of AERA Act, 2008 which came into effect on September 1, 2009. In accordance with the AERA Act, 2008 the Central Government established Airports Economic Regulatory Authority of India to regulate tariff and other charges for aeronautical services rendered at airports.