The conclusion of a stake sale agreement between Jet Airways and Etihad Airways is being delayed, as the Abu Dhabi-based airline wants a government assurance on an investment in India.
The demand came after India and the United Arab Emirates had, in principle, agreed on a bilateral investment promotion and protection agreement to boost two-way trade.
Etihad Chairman Hamed bin Zayed al-Nahayan told journalists on Sunday the airline needed to revise the proposed deal and it was too soon to say when a final agreement would be signed.
The development dragged down Jet’s shares on the Bombay Stock Exchange and these fell 7.7 per cent today, to close at Rs 570.75 each.
Commerce and Industry Minister Anand Sharma and Hamed al-Nahayan (the latter, step-brother of the current UAE president, is also head of the Abu Dhabi Investment Authority, a huge sovereign wealth fund) discussed issues related to trade and investment at a meeting in Abu Dhabi on Monday.
"We talked about the need to have an investment protection agreement. We have in principle agreed for that and it will be expeditiously concluded," Sharma told reporters after the meeting. Adding, "I have assured them that within the limit of our laws, India will protect the investments."
Explained a civil aviation ministry official: "Etihad wants an assurance that it does not meet the same fate as Etisalat.'' Last February, the Abu Dhabi-based telecom company Etisalat had to pull out of India and end the operations of its joint venture in India, following the Supreme Court decision to cancel 121 licences in the spectrum allocation scam.
Etihad is expected to buy a 24 per cent stake in the Naresh Goyal-owned Jet Airways, in a deal valued at Rs 1,600-1,700 crore (Rs 16-17 billion).
An agreement was expected to be signed this week. Asked if a Jet deal would be finalised soon, Hamed al-Nahayan said: "It's too early to decide. We need to talk with the Indians about other issues, including this."
Earlier in the month, the Etihad brass had called on civil aviation minister Ajit Singh and his colleagues, Finance Minister P Chidambaram and commerce minister Anand Sharma, to apprise them about the talks with Jet and interest in the Indian civil aviation market.
In a subsequent press conference, Etihad Chief Executive James Hogan said the due diligence findings would be presented to the airline board in a week and it would then decide.
Hogan said the Etihad management met Singh to understand the new foreign direct investment rules and the issues impacting civil aviation in India.
Government-owned Air India, in severe financial trouble, has been raising concerns that the Jet-Etihad deal would weaken it and adversely impact its international business.
The airline chairman, Rohit Nandan, had written to civil aviation secretary K N Srivastava in this regard in December 2012.
The letter said allowing of investments by foreign airlines would hurt the interests of domestic airlines and prevent Indian airports from developing into international hubs.
It added that Jet’s flights to Abu Dhabi could be used to carry passengers from India headed for the US and Europe,
However, minister Ajit Singh had dismissed AI’s concerns, saying the decision to liberalise norms was taken in the interests of the sector and not of any particular airline. Singh also said the government could not impose restrictions or cap Jet Airways’ flights to Abu Dhabi.