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Protection in the skies

Ranabir Ray Choudhury

SOME PEOPLE -- including some as sensible as Mr. Arun Jaitley, Minister in charge of Disinvestment -- may be inclined to suggest that the Indian civil aviation sector, both domestic and international, will now start looking up following the policy decisi ons taken on the disinvestment of Indian Airlines and Air-India. In fact, this should ordinarily be the case because the Government usually takes a policy decision for the good of the sector concerned in the first place, and for the good of the country u ltimately.

But, then, given the recent history of the evolution of civil aviation policy (particularly since the days of the United Front Government, 1996), the point has to be made that official policy-making has gone through some unusual phases which have taken a toll not only of the ailing civil aviation sector but also of consistent, logical thinking as far as the evolution of policy in this sphere is concerned.

The anti-heroes of this unfortunate process have been Mr. C. M. Ibrahim of the Janata Dal (hailing from Karnataka), and Mr. Ananth Kumar of the BJP (curiously, also hailing from the same State). Both have exhibited to the world a thorough inability not o nly to come to grips with the main problems afflicting the sector concerned but also to ward off pressures from players in the domestic civil aviation sector whose only objective (quite justifiably from their own point of view) has been to further their own business interests.

One cannot but bring up the house of the Tatas in course of this discussion because it is this august industrial house that has borne the brunt of the whims of both Mr. Ibrahim and Mr. Ananth Kumar regarding two projects in particular -- the Bangalore a irport project and another which would have given the air-traveller yet another choice to travel the Indian skies. Indeed, the tortuous history of both the projects provides firm evidence that in India, even when the reforms are on the right t rack, vested interests are more likely than not to have their way -- not by crudely opposing the new policies but by delaying their implementation with the help of filibustering tactics and by introducing unnecessary complications with the h elp of Ministers who are ready to cooperate for their own reasons (needless to say, all of which answer to the description of being patriotic).

The current Civil Aviation Minister, Mr. Sharad Yadav, hails from Bihar (the land of Laloo) and, as is obvious, is different from his two predecessors by virtue of this fact alone. It is a moot question whether Mr. Jaitley -- for whom one has admirat ion and regard not least because of the courage he has shown in agreeing to play the political game in which he is inexperienced and a novice -- would have been equally successful in `solving' the problems associated with the disinvestment of Air-India with Mr. Ananth Kumar or Mr. Ibrahim around as the Civil Aviation Minister instead of Mr. Sharad Yadav. Apparently, Mr. Yadav had begun to play the `old game' with his insistence that no foreign bidder for Air-India would get an equity stake in excess of 25 per cent which would ``ensure that they do not have a dominating influence on our board''. On May 1, a national daily quoted Mr. Yadav as having said: ``I believe that ownership and management of Air-India should rest with Indians'' . He added that the suggestion to offer 25 per cent of the stake to a foreign partner had arisen after the ``Ministry received feedback from several quarters that this was how Governments elsewhere had conducted disinvestment of national airlines''. The Minister reportedly also said: ``I am told even the US does not allow a foreigner more than 25 per cent stake in its national airlines''.

As events show, the `tutored' Mr. Yadav ultimately failed to toe the line of the `feedback' suppliers (whoever these nebulous people are flitting in and out of the corridors of power). In fact, even as early as the beginning of May, although he was by th en suggesting a definite line regarding the content of foreign participation in Air-India's disinvestment, he refused to ``commit on this subject until after a meeting with Disinvestment Minister Arun Jaitley''.

Incidentally, FICCI -- the civil aviation committee which is headed by Mr. Naresh Goyal of Jet Airways -- has favoured 25 per cent of Air-India equity for a foreign partner and 26 per cent for `NRIs and Indians'.

In the event, thanks to Mr. Jaitley, the strategic partner in the Air-India disinvestment has been given as much as 40 per cent of the airline's equity of which 26 per cent can be held by a foreign investor, even if that investor happens to be a foreign airline. The upshot of this is that the Vajpayee has accepted, by implication, the fact that a 26 per cent foreign-airline equity in Air-India -- where management control lies with the strategic partner (which includes the foreign-airline int erest) -- will in no way harm the country's interests. It is of some interest that this view was rejected outright by both Mr. Ananth Kumar and Mr. Ibrahim in the context of the matter of foreign-airline participation in the Tata project fo r setting up a new domestic airline.

What is important is that, as has been impliedly admitted by the Vajpayee Government, what is good for Air-India as regards foreign airline participation in the post-disinvestment equity is not so for Indian Airlines where, in terms of the finalised disi nvestment pattern, no foreign airline will be allowed to hold equity in the 26 per cent set aside for a strategic partner. The nation would like to know the precise reason for this difference in approach to disinvestment of the two national carriers. If foreign airlines are deemed to be a threat to the nation's security (for which reason they may have been debarred from investing in Indian Airlines), why are they not treated the same way when it comes to Air-India?

Or, does the reason lie elsewhere? As has been suggested by some troubled minds, allowing foreign airlines to get into the domestic civil aviation sector would quickly create severe problems for some of the existing carriers, both in the public and priva te sectors, the vested interest of which would be to ensure that such investment is excluded from the domestic Indian skies. Air-India is a different proposition altogether because it flies foreign skies and, therefore, does not pose an equal business ri sk to the existing domestic airlines.

The Prime Minister must realise (given his experience, he probably does) that the nation cannot be fooled beyond a point. If domestic business interests, in general, are at the receiving end because of the need to comply with the WTO stipulations on open ing up the economy to foreign competition, there is no reason why official protection should be accorded to domestic airlines, particularly when competition can only lead to customers being given a better product at (perhaps) more reasonable prices.