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‘Air India too can get a foreign airline as partner’

The proposal is lying with the Department of Industrial Policy and Promotion.

Written by Smita Aggarwal | Published: February 12, 2009 12:49 am

Civil aviation minister Praful Patel,already on the campaign trail,returned from his constituency Gondia on Tuesday only to realise that airlines have suddenly hiked fares. Even as he chastised carriers for the increase in fares,that till a week ago seemed affordable for all,he was clear that more competition would correct prices. He was equally emphatic about allowing foreign airlines to pick up equity stakes up to 25 per cent in the merged entity —– Air India & Indian Airlines. “The policy is the same for all,” he told Smita Aggarwal. Excerpts from the interview:

What is the status of the proposal allowing foreign airlines to take a 25 per cent stake in Indian carriers? Do you think the FDI proposal could have come earlier?

The proposal is lying with the Department of Industrial Policy and Promotion. The decision of the Committee of Secretaries has got deferred. As far as the ministry is concerned,we have proposed 25 per cent equity by foreign carriers,within a sectoral cap of 49 per cent. We thought that Indian carriers should be allowed to grow stronger,build scale and size,before making way for international equity. Air India,Jet Airways,Kingfisher Airlines are big carriers now,with Indigo and SpiceJet coming to that stage. The second reason for fast-tracking the proposal was the hit the financial structure of airlines took last year. To shore up their financial strength and safeguarding against a collapse,we thought we will support the carriers in terms of financial stability.

Would the foreign stake option apply to the state-owned carrier?

The National Aviation Company of India Limited,or Air India,is also covered under the proposed policy. The policy is a sector-specific policy covering the public sector company as well. If I had my way,I would have brought Air India in that position by now. I have always been supportive (of disinvestment).

Has the merger process of Air India and Indian been on expected lines? Is there a possibility of a demerger in future?

The merger process has been slower than what I wanted. Unfortunately,the IT integration has been delayed,while manpower integration has happened. I am unhappy with the delay. The people responsible have acted casually in this matter. I have been pushing for it to be taken up at the earliest. However,there is no advantage now of a demerger. Today there can’t be two standalone international and domestic carriers.

There have been instances where senior management of both airlines have said there is nobody to take a call on several issues.

Conceptually,there is nothing wrong (with the merger). The problem is on the implementation side. The government has taken a decision based on sound principles,advice and looking at the aviation scenario outside the country. Sometimes everyone wants to avoid a bitter pill,but you have to bite the bullet. People at both Indian Airlines and Air India do not want to look at the future,just look at their current jobs. It is not going to bode well for them.

What does the latest review show in terms of deriving benefits from the merger?

There are some benefits in form of rationalisation of routes. The airlines are now able to transfer passengers from domestic to international and vice versa seamlessly. With great difficulty we got star alliance,which came only because of the merger. But if IT integration had taken place at the desired pace,a common code of AI and IC would have gone and the star alliance would have been set in motion.

How has the slowdown affected the modernisation of the Delhi and Mumbai airports?

For Mumbai and Delhi airport modernisation,10 per cent and 25 per cent of land development respectively was allowed to meet capex requirements. It was to be treated as capital receipt and was to be utilised for capital expenditure. At that time,the real estate sector was booming and bids totalling to Rs 2,750 crore were received. However,the proposal faced resistance and was shot down. Ultimately a development fee had to be levied to fund capital expenditure. So,earlier,instead of realty players paying for the development,now passengers are being asked to pay.

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