Mumbai: The deal between Jet Airways and Abu Dhabi-based Etihad seems to have hit a fresh roadblock with the government divided on it. The Prime Minister's Office has asked Civil Aviation Ministry to allay concerns over the deal and has instructed the Cabinet Secretary to hold a meeting to discuss the stake sale.
Sources have told CNN-IBN that the PMO is wary of being dragged into another 2G-like controversy, more so since the number of bilateral weekly seats between Abu Dhabi and Delhi were dramatically increased from 13,330 to 36,370 just before deal.
Following the fresh concerns over the deal, Jet Airways' stock dropped as much as 6 per cent on Tuesday. The deal, largest foreign investment proposal in the aviation sector, is facing regulatory hurdles with various ministries raising major objections over the ultimate control of Jet Airways after the deal. An inter-ministerial group, headed by Finance Minister P Chidambaram had earlier flagged off three concerns on the deal. Concerns have been primarily raised on the proposed ownership and control structure of the domestic airlines.
However, Civil Aviation Minister Ajit Singh tried to play down the issues surrounding Jet Airways' deal with Abu Dhabi-based Etihad and said the concerns raised on the deal are being addressed by the regulatory bodies. External Affairs Minister Salman Khurshid also sought to clarify that the deal has not been stopped yet. "It is a process before the FIPB. They have to approve any deal. It is being examined, no one has said that the deal has been stopped," he said.
Ajit Singh, who is in favour of Jet's planned 24 per cent stake sale to Etihad, said the Securities and Exchange Board of India (SEBI) and the Foreign Investment Promotion Board (FIPB) will be looking into issues surrounding the deal. "FIPB still has to give clearance. It hasn't come to government yet. Let's wait for the clearance. Government is following procedure on the deal" Ajit Singh said.
A meeting called by the Cabinet Secretary, on instructions of Prime Minister Manmohan Singh, will be held in New Delhi to discuss the proposed stake sale. "It is the first big deal in Civil Aviation Ministry and it is good that the Prime Minister wants it discussed," Ajit Singh said.
Janata Party President Subramanian Swamy and BJP leader Jaswant Singh had earlier written to Prime Minister Manmohan Singh raising questions and alleged security implications over the deal. "I wrote a letter to the PM and am happy that he has taken notice of it. I want the deal to be scrapped because otherwise domestic airlines will be in a mess. Do you want to outsource everything to Abu Dhabi? If the deal is not scrapped, I will go to the court," Swamy said.
Sources have told CNN-IBN that this big ticket deal could be put into cold storage and that Ajit Singh has threatened to resign if it does not go through. However, the Aviation Minister brushed away the question of his resignation saying, "What sort of a question is that?" But the Prime Minister's Office has also asked Finance and Commerce Ministry to clarify matter.
The FIPB, which clears FDI proposals, on June 14 had deferred a decision on the deal citing control and ownership issues. "It (Jet-Etihad proposal) has been deferred. We need more details on effective control and ownership," Economic Affairs Secretary Arvind Mayaram had said.
Besides, capital market regulator Sebi, fair trade watchdog CCI and Department of Industrial Policy and Promotion (DIPP) also have reservations about the deal. After the deal, Jet Airways promoter Naresh Goyal would directly own 51 per cent in the airline.
The FDI policy for civil aviation, which was revised in September 2012, allows foreign airlines and foreign institutional investors to invest up to 49 per cent in an Indian airline. NRIs are already allowed 100 per cent investment.
(With Additional Inputs From PTI)