Review the deal

The Rs 2,058 crore deal between Jet Airways and Abu Dhabi’s national carrier Etihad has stoked a controversy at two levels.

One pertains to the deal itself which is said to have given greater controlling power to the foreign airline in the company than is warranted by the minority stake it is buying. The more important concern is about the government entering into an agreement with Abu Dhabi granting it excessive right to operate more flights between India and the Gulf. Though the government has denied a link between the two, there is a wide perception that it has done a favour to private interests by facilitating the deal with its decision. The prime minister has denied any differences within the government over the deal but has promised an examination of the issues involved. There are charges that the entire matter has the ingredients of another major scam.

With only 24 per cent stake, Etihad will be able to nominate the CEO and three directors of the company. This is considered abnormal and the Foreign Investment Promotion Board was not happy about it. The argument is that it is a matter between the two companies, but it takes a different complexion when one is a foreign company and there are fears that not everything is above board. The more serious issue is the government’s decision to increase the weekly bilateral flights for the two carriers from the present 13,300 flights to a huge 50,000. This will badly hurt the Indian aviation industry, including Air India. All the  airlines in the country are in bad health and the decision will bleed them further by severely limiting their access to a busy and lucrative market. No convincing explanation has been put forward for the decision which will hurt national interests. Security concerns have also been raised about the deal.

Civil aviation minister Ajit Singh has defended the deal, claiming that it involves a high level of foreign direct investment and that all regulatory processes are being gone through. But FDI cannot in itself make a deal  right and acceptable. He has also attributed criticism of the deal to rivalry and said it is short on facts. But his defence also might need the support of more solid facts than are presented. Since important questions have been raised about the deal, all its aspects should be scrutinised thoroughly before it is given final approval. The need for enhancement of flying rights should be critically reviewed. 

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