Things are getting worse for Civil Aviation Minister Ajit Singh day by day. Just when the controversy over his ministry giving away almost 40,000 additional weekly seats to Abu Dhabi was waning, another salvo by a BJP MP has stoked the fire again. Jharkhand MP Nishikant Dubey has made several damning allegations over the bilateral pact – the allegations are so damning that the matter has now reached the CBI! Dubey has alleged that various arms of the government have been working for months to help Jet Airways’ Naresh Goyal clinch a life saving deal with Abu Dhabi’s Etihad Airways. He has also alleged that critical changes were made when the policy for FDI in the civil aviation sector was notified this March to aid and abet Goyal’s deal with Etihad. So not just the bilateral pact, the entire FDI policy is under the scanner now. Dubey raised these issues with the Chief Vigilance Commissioner and the Prime Minister on Saturday and now, his letter has been forwarded to the CBI for further investigation. If the CBI does move forward on Dubey’s complaint, we can safely assume that the bilateral pact between India and Abu Dhabi, which was signed on April 24 but still needs approval of the Union Cabinet, could be delayed interminably. And, of course, this could put a spanner in the equity deal between the two airlines as well. In other words, Jet Airways and Etihad Airways – the two principal actors in this drama – have a lot to be anxious about now. A story in DNA newspaper this morning says the entire issue of the bilateral pact between India and Abu Dhabi has landed with the CBI, on a complaint by BJP’s Dubey. A CBI spokesperson told Firstpost “as of now, CBI has neither registered a case nor begun a preliminary inquiry into the matter”. As a matter of routine, when any complains lands on the CBI’s desk, the agency first ascertains whether it falls within its jurisdiction and whether it is genuine. In this politically sensitive matter, where not just the fortunes of Jet and Etihad but also those of the top four ministers of the UPA government who hastily cleared the bilateral seat revisions rest, perhaps the CBI is waiting for a signal from the top to begin a probe? Dubey’s letter is neither the first nor the most eloquent in criticizing the undue haste with which the ministers for commerce, finance, external affairs and civil aviation went about approving an increase of almost 40,000 weekly seats to Abu Dhabi. But it makes several points which perhaps no other MP has made. A copy of the letter is with Firstpost: 1) On March 1, DGCA modified/ deleted clauses 1.7, 1.8 and 1.9 of the guidelines issued in 2008. Clause 1.7 prevented passing on of effective control of management of a domestic airline to a foreign airline. “This was deleted”. Clause 1.8 was modified so that a scheduled passenger carrier airline having FDI from foreign airline could now pass on the right to interfere in the management of domestic airlines. What Dubey is saying in simple terms is this: the FDI policy notification allowed airlines like Jet to get MRO work done and avail of other facilities at Etihad’s Abu Dhabi base. This loophole has subsequently been used by Jet to propose that much of its business would shift to Abu Dhabi. In fact, this has lead the Ministry of Civil Aviation itself to now oppose any equity deal between Jet and Etihad, saying principal place of business must remain in India. 2) Clause 1.9 prevented a domestic airline from entering into financial arrangements like lease-finance, hire purchase with a foreign airline. “This could have stopped Jet Airways from receiving a soft loan of $300 million at a mere 3 percent interest rate. This clause was modified to permit domestic airlines to receive such facilities from a from a foreign airline.” 3) Dubey has also alluded to Jet Airways’ ownership being shrouded in mystery because of Tailwinds, a company owned by Goyal which in turn holds share in Jet Airways. “Are there no doubts over the illegality of foreign ownership of Jet Airways? How can the relevant authorities gloss over this fact?” The MP has said after the share sale by Tailwinds to Goyal in May this year, Goyal owns 66 percent of Jet but Tailwinds continues to hold 9 percent of the total 75 percent promoter holding in Jet. “Once Shri Goyal gives 24% of his 66% stake (to Etihad), he will own 42% of Jet Airways. His holding will work out to 51% only after taking into account the shares left with Tailwinds”. 4) The MP has also expressed his fear that due to diversion of a bulk of Indian traffic through this deal to Abu Dhabi, airports at Delhi and Mumbai may be forced to increase the user development fee (UDF) levied on every departing passenger. Just when Ajit Singh and his ministry were preparing a detailed cabinet note on bilateral pact with Abu dhabi, the entire matter has reached the CBI. Now, whether the investigating agency begins a probe quickly or awaits a nod from its masters remains to be seen.
Posted on: Tue, 09 Jul 2013 09:19:22 +0000
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