Rediff Logo Business HCL Infosystems Banner Find/Feedback/Site Index
September 1, 1998


Infac Banner

Email this report to a friend

Eternity on the runway, as take-off signal remains elusive

Amberish K Diwanji in New Delhi

It was akin to an aeroplane waiting at the end of the runway, waiting to take off. But the control tower repeatedly failed to give the green signal, forcing the pilot to finally abandon the aircraft.

This is the case of the Tata Airlines project, which has been hanging fire since the days of the Congress government in February 1995, through the United Front government when then aviation minister Chand Mahal Ibrahim stonewalled the venture with a determination that bordered on fanaticism, and finally to the Bharatiya Janata Party government which too could not allow the take-off.

The Tatas had initially planned a Rs 14.75 billion project in alliance with Singapore International Airlines. The proposal was first submitted to the civil aviation ministry, then headed by Congressman Ghulam Nabi Azad.

Almost immediately, there was opposition, overt and covert, from various quarters. To make matters worse for the then Congress regime, by the time the various proposals could be studied, its time was running out and it was hardly in a position to take a policy decision on such a major matter.

The single greatest criticism, and which was often cited as the single greatest cause for not allowing the project clearance earlier, was that the Tatas planned to set up an airline for the domestic sector in collaboration with an international airline. Till date, nowhere in the world has any foreign airline been given clearance to operate in the domestic sector, a fact which was admitted by the International Air Transport Authority chief a year ago during a visit to India.

With the Congress government crumbling at the hustings in 1996, the new United Front government took office, which only meant another round of submission. However, it was here that things took a different turn. The UF's finance and industry ministers, Palaniappan Chidambaram and Murasoli Maran respectively, were keen supporters of the project, but aviation minister Ibrahim said the project would be cleared only "over his dead body". The battle had begun.

When the free skies policy was announced way back in late 1991, a host of entrepreneurs set up shop. Then the names were Damania, NEPC, EastWest, Jet, Raj, Sahara, ModiLuft... Today, only Jet soars, while Sahara struggles along.

EastWest was caught up in a web of gangster warfare and its managing director, Thakiyuddin Wahid, was gunned down in Bombay on November 13, 1995. The airline never recovered and was grounded shortly afterwards for its inability to clear its dues to the Directorate General of Civil Aviation. Damania, NEPC, Raj, ModiLuft and the others folded up, unable to cope with the competition.

Ibrahim insisted that in the national interest, no project in collaboration with a foreign airline would be allowed within India. The theme caught on, and Indian Airlines, facing competition for the first time, echoed the idea. Unions opposed the Tata project fearing job losses if Indian Airlines continued to incur losses. Ibrahim ensured such a high level of hysteria that a layperson could have been forgiven for thinking that the Tatas were the Public Enemy number 1!

This was also the time when conspiracy theories began doing the rounds. The aviation sector had clearly sounded the death knell for many wannbe entrepreneurs; any new entrant, and certainly the Tatas were no pushovers, could have been dangerous. Despite the efforts of Chidambaram and Maran, it was Ibrahim who was able to have his way.

When Rediff On The NeT informed Maran, at present in Madras, of the Tatas' decision, he was shocked and immediately blamed outside influence. "There are certain vested interests who have been against the project right from the beginning," he stressed, "and they have not only been very active, but as we now can see, very successful."

A businessman, SRF Limited vice-chairman and managing director Arun Bharat Ram, expressed similar thoughts. "There has been speculation of vested interests and now, this only seems stronger," he said.

Unfortunately for the Tatas, when the first guidelines were framed, the government had much leeway in accepting or rejecting projects under its policy rules. When the Tatas came up with their plan, a new policy was framed by the then civil aviation secretary Yogesh Chandra, which clearly stated that no projects would be allowed in venture with foreign airlines or airport companies.

In response, the Tatas dropped Singapore Airlines from the project as partners, keeping only a technical collaboration with them. There were precedents. ModiLuft, set up by S K Modi, had a technical collaboration with Lufthansa, and Jet Airways has one with Malaysia Airlines.

Alas, to no avail. Now the fear was that Indian Airlines would suffer. Around this time, it also became clear that the economic growth rate was falling, and worse, the domestic airline market was shrinking. In 1996-97, air traffic declined by 1.4 per cent and 2.6 per cent in 1997-98. It was widely believed, and feared, that any new entrant at this delicate juncture would only make a bad situation worse. An Indian Airlines internal memo claimed that Tata Airlines would be dangerous for the national airline. This reason was often used by the Bharatiya Janata Party government to delay a decision on the project.

Pranab Mukherjee, former finance minister, blames the lack of a clear policy. "The government should have a set policy and follow it," he said. He blamed the Tatas' decision to withdraw the project as indicating a lack of confidence in the government.

Ironically, when the BJP came to power, many thought the project would see the light of day, especially given the BJP's penchant for swadeshi (national) projects.

"You can't get more swadeshi than the Tatas," pointed out Maran. And added: "The fact that three successive governments, all of different parties and ideologies, could not clear a project supported by the mighty Tatas, India's largest corporate empire, can only speak for the strength of these 'vested interests' that have managed to carry the day."

Maran categorically refused to blame the trade unions for the scuttling of the project. "Why should the unions actually oppose it?" he asked, "After all, in India they cannot be sacked. Moreover, how come the unions never came in the way of the other sectors that have been opened up?"

The question is that if the Tatas cannot get a project off the ground, then who can? And what kind of a signal does it send out to the rest of the world at a time at a time when India is desperately seeking investments?

Tell us what you think of this report