Airbus: Patel to ask for GoM

Following objections by the Finance Ministry on the Indian Airlines proposal to purchase 43 Airbus aircraft, the Civil Aviation Ministry wil...

Following objections by the Finance Ministry on the Indian Airlines proposal to purchase 43 Airbus aircraft, the Civil Aviation Ministry will approach the Prime Minister to constitute either a Group of Ministers or a Committee of Secretaries to make one last attempt at negotiating with Airbus Industrie to lower its prices.

Civil Aviation Minister Praful Patel is expected to himself take up the matter with Prime Minister Manmohan Singh. It’s learnt that the Finance Ministry has stopped short of rejecting the Cabinet note on the Indian Airlines proposal and instead suggested that the Civil Aviation Ministry approach the Ministry of External Affairs to use diplomatic channels to bring down the price.

The observation has baffled the Civil Aviation Ministry since the negotiations carried out by Indian Airlines — which has settled the deal at around $1.9 billion — with Airbus was monitored by an overseeing committee, headed by former CAG C G Somaiah, which was formed by the Prime Minister.

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Given that price negotiations cannot possibly be conducted through diplomatic channels, sources said, the Civil Aviation Ministry worked out a compromise and agreed to make one last attempt at negotiations.

The Finance Ministry has agreed that after these negotiations it will not stand in the way of this note being tabled before the Cabinet Committee on Economic Affairs.

Patel confirmed that there would be another round of negotiations. ‘‘I will write to the Prime Minister to constitute a GoM or a Committee of Secretaries to negotiate once more with Airbus and make another effort to reduce its prices,’’ he said. ‘‘I have always been in favour of ensuring transparency in the process.’’

The Public Investment Board cleared the plan last year and gave the green signal to IA for negotiating the final price with Airbus. The airline has proposed to buy 20 Airbus 321s, 19 Airbus 319s and four Airbus 320s.

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Finance Ministry representatives were involved at every stage. The Secretary (Expenditure) was not only part of the PIB but was also a member of the overseeing committee which cleared the price finalised by IA’s negotiating team.

Some MPs had alleged that Air Asia — a South East Asian low-cost carrier — had bought Airbus aircraft at much lower prices. Airbus has refused to divulge price details saying that it was bound by a confidentiality clause. It, however, said that Air Asia had chosen a low-cost configuration in its aircraft and minimal accessories. Also, it had placed an order for 100 aircraft and all this had automatically lowered the price.

Despite this, the Finance Ministry has yet again raised fears that other airlines negotiating with Airbus may have struck a better deal and wants this to be certified by the aircraft manufacturer.