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Tribune Exclusive
Clipping wings of national carriers — Rudy style
Swati Chaturvedi

New Delhi, February 14
The Minister for Civil Aviation, Mr Rajiv Pratap Rudy, has tried to cut the wings of the national flag carriers by delinking bilateral rights from the recommendations of the Naresh Chandra Committee in a Cabinet memo. Authoritative sources said this was done primarily to favour the private carriers — Jet and Sahara — and the Cabinet was split on the issue with Union Minister for Disinvestment Arun Shourie being a vociferous opponent and Prime Minister Atal Bihari Vajpayee deferring a decision on the issue.

In his haste to help the private operators, Mr Rudy gave the procedure a go-by. Thus the standing instructions of the government necessitating routing of any Cabinet memo with financial implications through the financial adviser of the Ministry were not adhered to. A copy of the Cabinet memo available with The Tribune proves that this was not done. This is despite the fact that on a conservative estimate, the bilateral decision would cost the national carriers more than Rs 5000 crore. Officials of the Civil Aviation Ministry question the “unseemly haste” and the reasons behind the recommendation to delink bilaterals.

Consider the following figures: Indian Airlines earns Rs 300 crore from its bilateral rights. If it is allowed to fly on more routes it will earn Rs 1000 crore from the same rights. This is applicable to Air-India also. The main reason that the airlines cannot fly is lack of fleet. Mr Rudy claims that it would be a “political impropriety” to take a decision on fleet expansion on the eve of elections but he sees nothing wrong in giving a hand to private carriers.

Interestingly, even Singapore Airlines, which wanted a stake in Air-India wanted a seven-year lock-in period for its bilateral rights since an airline’s value comes from its bilateral rights and fleet size. In effect, giving away the national carriers’ bilateral rights and not allowing fleet expansion is a form of asset-stripping which would ensure that when the airlines are finally privatized, they would go for a song.

As an afterthought, Mr Rudy removed the recommendation of 49 per cent foreign direct investment from the Cabinet memo. This, say officials, is “sham privatisation” as the government had earlier linked the decision to an equity infusion of Rs 325 crore for fleet expansion with privatisation. Even the N.K. Singh Committee had recommended 74 per cent FDI in aviation. This recommendation, according to sources, has upset an influential domestic player who wants to take over a national carrier to avoid genuine competition. Says an official: “This is a classic example of crony capitalism masquerading as reform. Either allow the national carriers to grow or allow privatisation”

It has been eight years since the Kelkar Committee recommended that Rs 450 crore be given to Indian Airlines for fleet expansion. This time around the minister has shelved all talk of fleet expansion and decided to hawk the bilateral rights. In a shocking omission, the Cabinet memo was silent on all the revenue implications of the decision. This provoked the Cabinet Secretary to return the memo to the Aviation Ministry.

While, the Naresh Chandra Committee, set up under the former Cabinet Secretary, was supposed to give a blueprint for the much-delayed new aviation policy, its recommendation such as opening up the bilateral regime were considered inimical to the national carriers.

Significantly, the Parliamentary Consultative Committee on aviation questioned the recommendations with one Trinamool Congress MP, Mr Dinesh Trivedi, going to the extent of asking, “Is this the Naresh Goyal committee report or the Naresh Chandra report?” Contacted by The Tribune, Mr Trivedi said the entire report favoured private operators. He said Mr Rudy had agreed to set up a sub-committee to study the report but still took it to the Cabinet. “What is the point of wasting public money if you don’t consult us? They should wind up the committee, when they go back on their assurances.” he added.

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