The Cabinet Secretary has called a meeting of secretaries to discuss the Jet-Etihad deal on Prime Minister Manmohan Singh's instructions and sources say that this big ticket deal could be put into cold storage. Sources say the PMO has asked Ministry of Civil Aviation to look into concerns surrounding the deal even as Aviation Minister Ajit Singh, in favour of the deal, has threatened to walk out of the government if it doesn't go through. So what's the inside story? CNN-IBN's business editor and aviation correspondent Karma Paljor joined IBNLive readers for an interaction on the issue.
Q. Do you think this is a result of political pressure from the other UAE carrier which is playing out since Etihad will be eating into Emirates share which currently has the largest market share for any foreign airline? Asked by: JK
A. It could be. Despite the poor financial health of Indian carriers we do remain one of the most lucrative aviation markets in the world. The interest of foreign airlines is immense. A market leader like air Asia entering India just shows it.
Q. Hi Karma, Was the PM being made a scapegoat by these ministers and that he has realized it this time and does not want to take any flak if uncomfortable questions are raised? Are his own ministers still taking advantage of him and scoring points for themselves? Is it not fair for the PMO to also make sure that the PM's reputation does not get further tarnished in the current circumstances? Your take on this. Asked by: JK
A. We have to remember that that there are a number of lobbies at play, Airports/Airlines. They are doing their best to derail what is one of the biggest aviation investments in the country. The only criticism that can be made of the PMO is the delay in reaction. They have done so after two months of the MoU being signed. The concerns are there but if we truly want to encourage foreign investments we have to stand by our decisions. Due diligence must be exercised by concerned government arms.
Q. We need to go into details on the deal. It is not as clean as it looks. There are security concerns. As the talk goes there is no change with the deal as at present the funds for Jet were coming on the havala route from tax haven and with the deal it would be regularised by coming in the FDI route. We need to go into the funding of Jet as also its owner Naresh Goyal and go into his background. Asked by: AKS
A. I agree. Jet Airways has been one airline that has been at the centre of various allegations about its funding. Even during the NDA rule when LK Advani was home minister concerns were raised and a finally a clean chit given. It is a listed company and our authorities including the SEBI have gone through its books. As far as security concerns are concerned the government should have thought about it when it decided to let foreign airlines invest in India.
Q. What's the inside story? Asked by: Deepak
A. Lots of stories and rumors doing the rounds. We can only be responsible and report on facts right now. The increase in the number of seats between the two countries from 13000 to 40000 does ring a bell.
Q. Is the Diarchy in the congress party responsible for this type of irresponsible behavior of the government? Asked by: vineet Sharma
Q. Why should the PMO wake up now and write a note? That too two months after the deal was signed. If the ministers and MPs were so concerned about security then why was FDI in airlines allowed? This shows the larger problem with the govt. It will only scare away potential investors who want to invest in India. Why 46,000 seats threaten it? Asked by: Deepak
A. Because Air India and other Indian airlines lose out. They will be entitled to over 40000 seats. Their market share will increase immensely at the cost of our airlines.
Q. Will it hurt reforms in aviation sector as airlines are already running in huge losses and this difference of opinion will hurt further investments? Asked by: Shailesh
A. Yes, it will. Even those foreign airlines who are sitting on the fence will think twice before investing in India.
Q. Is there a way out for Jet as it needs investments and at the same time technologically efficient planes to cut down its losses even if it means compromising on management control of the airline? Asked by: Hitesh
A. Not only jet most of the Indian carriers need investment. Kingfisher went down because of that. It's not about new planes, jet had good aircraft in its fleet but it's about money needed for operations and expansions to reach out to a larger market. In the current scenario no Indian carrier can dream of being a global airline without outside investment.
Q. Does the conflict speak a lot about Indian political as well as bureaucratic conflict which means Indian aviation sector has to suffer as this deal somewhere else would not have gone through this conflict? Asked by: Manush
A. Yes it does. IT shows the inefficiency and lack of leadership. A decision that was taken to allow foreign airlines take a 49 percent stake cannot be taken forward. They did this because the sector was facing huge losses.
Q. Will making of Abu Dhabi its hub impact some jobs of Jet and also mean more control of Etihad in running the operations? Asked by: Hitesh
A. It could impact jobs here in India. If the hub was in India then employment opportunities go up but instead of this opportunities in Abu Dhabi will go up.
Q. What is your though? Deal or not deal? Asked by: Rome
A. I believe the deal will go through. The big question is why were the bilateral s (number of seats) allotted to Abu Dhabi increased the day Jet and Etihad singed the MoU. The number increased from 13000 to 40000.
Q. Does the Etihad deal means that India entrepreneurs can't run airlines and only foreign collaborations will work? Asked by: Sanjay
A. Looks like that for now. We seem to have run out of money here in India. The costs of operations have gone up and the dollar appreciation has hit us bad. They are struggling to just run their respective airlines
Q. Do you feel that what is causing conflict is about Etihad trying to exert pressure on Jet for management and operational pressure on Jet thereby taking control of the airlines altogether? Asked by: Manush
A. This is certainly one of the sticking point. But I hear from my sources that most of the terms and conditions between the two airlines have been worked out.
Q. Why does India have too many agencies like SEBI(Securities and Exchange Board of India, CCI (Competition Commission of India) or cabinet looking after every deal as business gets effected and after many years deals don't reach any conclusion. Asked by: Sanjay
A. It has its pros and cons. We are not like China which runs a single window investment channel. But I am told that even there corruption runs wild. Multiple agencies do pose problems but it's needed.