Hanging Mid-Air

IT'S a case of missives flying left, right and centre. Just when everyone thought the Tatas had all but given up on their pet aviation project, up they come up with a fresh proposal—only to be told off again. Since December 1977 when the Tatas submitted their proposal, which they say meets the requirements laid down by the government on direct and indirect foreign equity participation, they have been at the receiving end of endless queries from the ministry of civil aviation.

Tatas' latest offering came alone, minus their erstwhile partners Singapore International Airlines (SIA) except for a technical agreement minus any equity participation. But apparently even that was not enough, because the ministry now says it needs more time to 'study' the proposals, deferring a decision on allowing Tata Airlines to establish itself as a full-fledged airlines till August. Even though civil aviation minister Ananth Kumar said "the government was looking at the Tatas' proposal seriously," Tata executives say the wait's too long.

They refer to two government decisions: the April 1997 guidelines of the Union Cabinet and the June 1998 guidelines of the Directorate General of Civil Aviation (DGCA). While the April guidelines prohibit foreign airlines from holding equity in a domestic airline, the DGCA guideline allows foreign expertise and agreements with foreign airlines in specified areas.

Tatas say their airlines will bring investment worth Rs 1,475 crore including more than $80 million FDI. To begin with, it plans to operate seven aircraft of about 140 seats each by the end of the first year of operations. At the end of five years it will be a total of 18 aircraft. Extremely conscious of the equity participation, the Tatas say 60 per cent of the airlines would be owned by them while the rest 40 per cent raised by other Indian investors, none of whom have a background in aviation. Its only link with Singapore Airlines: access to SIA's large technical knowhow for engineering, pilot training and computerised systems such as reservations, maintenance, planning, departure control and other related activities.

But Tata executives say no matter how hard they try, the nickel never seems to drop. In July 1997, the Tatas received a letter from the ministry enclosing the new policy and indicating that 47 aircraft of 120 seats each are required between 1997 and 2000. The Tatas immediately made an application in line with government policy. Then the ministry wrote back asking for clarifications including approval of memorandum of association and articles of association, particulars of directors for ministry of home affairs security clearance, clearance from the Airports Authority of India for constructing a hangar at Delhi and so on. In January this year, the Foreign Investment Promotion Board (FIPB) reviewed the Tata application and cleared the project. But the ministry of civil aviation didn't attend the meeting and asked for a deferment claiming "they'd not had enough time to study the proposal". Tatas also tried to impress upon the government that technical services aren't the same as management control.

But the ministry would have none of it. In March 1998, it demanded details of the technical services agreement with Singapore. On May 18, 1998, the FIPB made it clear that while it had cleared all proposals approved by the previous government, it would not be able to give an opinion on the Tata proposals. When last month, the FIPB took up the Tata proposal again, the ministry asked for deferment of four weeks as they needed time to study the report in depth. On June 18, the Tatas clarified that their proposals meet the guidelines; and that they were even willing to disclose the names of the FIIs willing to give the money. The next day the ministry got back asking the Tatas for a point-by-point clarification on the DGCA guidelines to which the Tatas replied the same day.

The government got back again asking the Tatas to furnish details of shareholders and directors of FIIs investing in the project. The Tatas replied saying that no FI would commit to taking shares until government approval. Once this is received, Tatas will discuss the project with FIIs. When the FIPB took up the proposals yet again on July 11 this year, the civil aviation ministry asked for four weeks to evaluate the proposal.

Even more galling for the Tatas has been what they allege a systematic campaign to keep them out of business. Last fortnight, 35 MPs, cutting across party lines, denounced the FIPB haste in pushing through the Tata project. The MPs—who strangely included two former civil aviation ministers C.M. Ibrahim and Jayanti Natarajan—cited unprofitability of Indian Airlines as a reason why the Tata project shouldn't be allowed. The IA, under its chairman P.C. Sen, has managed to pull itself out of the slump in the last few years that coincided with the arrival of private airlines. Sen has gradually but forcefully interceded with militant unions in IA and for the first time in many years, it has chalked up a profit of Rs 52 crore last year.

Counters a Tata executive: "IA has 54 aircraft; Jet Airways, a private 100 per cent NRI-owned airline has 22 aircraft; while the Tatas will have only seven. How can we be a threat to IA?" As for arguments put up by rivals that the Tatas are only a 'front' for the SIA, he says: "If all private airlines in the country go for their 'C' checks and training programmes outside, how come no one raises queries about them?" A question that, in the days to come, many more may be tempted to ask.