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February 10, 1997


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Will C M Ibrahim allow the Tata-SIA airline to fly?

When Civil Aviation Chand Mahal Ibrahim said in November, "I have to improve the existing infrastructural facilities before I can permit the Tata-Singapore Airlines project to go into operation" it was assumed that the government was waiting to put into place a policy framework governing domestic carriers before giving permission to Tata-SIA to launch their airline.

Back then, he had hinted that the much-awaited policy would be unveiled early in the new year, making transparent the government's stand with regard to allowing private sector participation in civil aviation.

Last fortnight, that promise was fulfilled when the new civil aviation policy was announced with a great deal of fanfare. To be sure, the policy has clarified the government's stand on several issues, but it remains vague on such key areas as the participation of foreign airlines. More specifically, it lets hang the crucial questions: What happens to the proposed joint venture between the Tatas and Singapore Airlines?

"The issue of whether a foreign airline can hold a stake in domestic carriers has been referred back to the ministry to determine in consultation with other ministries," said Yogesh Chandra, secretary to the ministry of civil aviation.

"If Mr Tata wants to set up an airline, he can do so. But if he wants to let a foreign airline acquire a stake in it, he has to wait until the ministry has studied the matter," Chandra said.

This classic case of passing the buck has dogged Tata-SIA ever since the Rs 24 billion proposal was submitted two years ago in February 1995. The Foreign Investment Promotion Board placed the proposal before the Cabinet Committee on Foreign Investment which, in turn, referred a final decision to the ministry.

Meanwhile, ministers have come and gone. Ghulam Nabi Azad, the minister in question in 1995, chose not to take a decision. And in June 1996, Ibrahim was given the portfolio.

Ibrahim has made his mind clear. 'I am an Indian first, businessman later,' he told The Times of India, which reported that although a formal decision was awaited, the minister has 'categorically ruled out allowing Singapore Airlines to fly in the domestic sector.'

Ibrahim's objections are based less on nationalism and more on what he sees as unfair business practice. In November he had told Sunday that Singapore would never allow Indian Airlines into its domestic aviation sector. Why then should India allow Singapore Airlines to compete with its national carrier, Indian Airlines?

That sentiment may well have some basis, but the fact is that existing airlines in the business already have considerable investment by foreign partners. Jet Airways, for instance, is held 60 per cent by an NRI, Naresh Goel, another 20 per cent is held by Kuwait Airways and the remaining 20 per cent is held by Gulf Air.

Civil aviation circles have naturally been asking the obvious question: if Jet Airways can be allowed, why not Tata-SIA?

Chandra says the future of Jet's continuance will also be decided by his ministry, but until it takes a decision, the airline will be allowed to continue. But should Ibrahim actually take a formal stand against foreign equity participation, will it mean that Jet will be forced out of business? Ibrahim himself says he would like to see Jet's foreign equity divested (his policy, however, makes no such demand).

Courtesy: Sunday magazine


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