FDI is unlikely to happen in a hurry
Prasanna Mohanty | April 30, 2012
There is nothing new in former civil aviation secretary MK Kaw’s twin revelations in his recently released book, “An Outsider Everywhere – Revelations by an Insider” – that it was former civil aviation minister CM Ibrahim who allegedly at behest of the Jet Airways thwarted the Tatas from floating a private airlines in collaboration with the Singapore Airlines (SIA) in 1997.
Ibrahim always accepted that he was opposed to the idea of allowing foreign airlines. He gave numerous interviews to the media explaining his position then and on several occasions thereafter. He is even quoted as having suggested to Tata chairman Ratan Tata to float his own airline without a foreign collaborator. The name of Jet Airways as the one that campaigned against the Tata-SIA venture too is a matter of public knowledge and frequently discussed in the media at the time.
Coming as it does from someone who should know the state affairs, Kaw’s revelations merely confirm what is already known. It may also be pointed out that the attempts of the Tatas to enter aviation were thwarted earlier in 1995 and later in 2001 too. Ironically, it was the Tata Airlines, set up by aviation pioneer and former Tata chairman, JRD Tata, which was taken over and rechristened Air India by the government way back in 1950s.
Now that the government is mulling FDI in aviation sector, to the extent of 49 percent, Jet Airways is again being named as one of the airlines opposing the move even though its chairman Naresh Goyal has public said, “We do not need any FDI. We are doing fine. But we welcome the move”. The other airline being named as opposed to FDI is IndiGo.
This isn’t surprising. Industry insiders say both Jet Airways and IndiGo are the market leaders today with 29 percent and 22 percent market share, respectively. Any FDI will only go against their interest and allow Kingfisher and other airlines to improve their financial muscle.
It is a matter of public knowledge that the government revived FDI in aviation sector after Kingfisher airline went into a tailspin a few months ago. Other airlines, including Air India, too are in a very bad shape for various reasons. While Air India is a victim of rank bad policy decisions and management, the other airlines are finding it tough to survive because of mounting fuel cost, high taxes and tough competition. Even Jet Airways registered loses recently.
Opposition to FDI by Jet Airways and IndiGo is irrelevant now. The government is not in a position to steer this policy decision, just as it failed to steer the FDI in multi-brand retail. Ally Trinamool Congress is opposed to it and that is why the last time the cabinet took up the issue in April, it had to postpone a decision. Instead, aviation minister Ajit Singh was asked to take Trinamool Congress as well as other allies on board. Singh’s first attempt to convince Trinamool chief Mamata Banerjee failed when he had to return from Kolkata without meeting her a few weeks ago.
The government now has more pressing issues at hand- to get the budget passed, get some financial sector reforms passed and find a consensus candidate for the presidential election. Insiders say there is little chance of FDI in aviation getting into the list of priorities is thin, for now.
Kaw, however, makes a powerful point that needs to be pondered over when he writes that, “The country does not have an aviation policy even today. It is the considered view of many experts in civil aviation that FDI investment will not be allowed in India till this is permitted by the powerful owners of Jet Airways.”
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