The proposed Singapore Airlines Indian joint venture with the Tata Group is back under government scrutiny. And while the civil aviation ministry insists it will ban all foreign participation in Indian carriers, the weak state of some private Indian carriers suggest the sector may benefit from foreign investment and management expertise.
The Foreign Investment Promotion Board (FIPB) has delayed a decision on the SIA-Tata project with the civil aviation ministry continuing its two-year long opposition to the venture (despite a change of government) in the face of support from both the industry and finance ministries.
But one source close to the deal suggests that the aviation ministry may only be holding out as a token gesture of support to the incumbent private carriers. At presstime, a decision was expected by the end of October. And with the final decision lying with the industry ministry (the FIPB falls under its remit) there should be room for optimism among members of the SIA-Tata team. 'Tata and SIA have not received any official word from the FIPB,' says Karmijit Singh, SIA's director of corporate affairs. Indeed, any further delay could well snap SIA's patience. 'It is not helpful for foreign investors to have the matter go on like this indefinitely,' he adds.
Proponents of the deal at the two ministries point to the precedent already set by Jet Airways, which already has two foreign shareholders: Kuwait Airways and Gulf Air both with 20 per cent. Indeed, Jet Airways is the most successful of the private carriers, supporting the contention by sources close to the Tata-SIA deal that foreign equity and management expertise can only be good for the Indian market. Industry ministry sources suggest that a ruling against foreign participation, which would force Jet Airways to terminate its links with Kuwait Airways and Gulf Air, would send wrong signals to the world. India cannot afford to put itself in that situation when it is aiming to attract US$10 billion in foreign investment annually.
Civil aviation minister C M Ibrahim insists that no foreign equity participation will be allowed in the domestic sector to protect India's carriers. 'If Tatas want to start an airline, let them come on their own, but not with Singapore Airlines,' he maintains. Ibrahim has said he would ask Jet Airways to shed its foreign equity participation. The carrier refuses to comment.
Opponents point to the extra capacity that an SIA-Tata joint venture would put in a market already suffering overcapacity. But equally, with the future viability of a number of Indian operators, including East West Airlines and ModiLuft, in doubt, SIA-Tata could well fill that gap. The Rs22 billion joint venture, in which Tata will take a 60 per cent stake, envisages the acquisition of 19 B737s, A320s or MD80s over five years.
R Prasad/M Odell
Source: Airline Business
