Tatas attack aviation minister

"Firstly, the Tatas did not give definite names of the FIIs investing in Tata Airlines. In a communication on June 17, the Tatas indicated that AIG and GIC have shown interest in being investors in TataAirlines in December 1997. The Tatas also clarified that both AIG and GIC did not have airline shareholders and that Tatas would take an equity funding from only those FIIs that meet the government guidelines for airlines,” Tatas said in a statement here.

“In subsequent correspondence with the ministry, it was clearly indicated that FIIs will decide in equity investment in a domestic airline only after suitable approvals are received. This is because the airline industry is heavily regulated by the government. The last official correspondence on this matter was on July 6th 1998. Since then, in all contacts between the Tatas and the ministry of civil aviation not once did the ministry sought any clarification on this matter or any other matters,” the Tatas said.

“It, therefore, strains credibility for the minister to say that ministry was seeking information about possible links between possible investors (!) and a foreign airline.”

On the second observation made by the minister that "the Tatas hadproposed a Rs 300 crore technical fee to Singapore Airlines in a project of Rs 1,475 crore which seemed high", the Tatas said "the technical services fee proposed to be paid to Singapore Airlines and other parties (still to be selected) from whom Tata Airlines would take technical services was Rs 165 crore over five years and not Rs 300 crore as stated by the minister".

During the same period, the revenues generated by Tata Airlines was expected to be about Rs 5,733 crore. The proposed fees for technical services is 2.8 per cent of the revenues which is well within the guidelines for such fees as laid down by the Reserve Bank of India, it added. “Thus, it is difficult to accept this as a reason for not taking a decision on the Tata proposal for a domestic airline,” Tatas added.

Aviation industry sources say that the Tatas’ replies to Kumar’s comments shows that either the minister was ignorant about the Tata Airline proposal or he was deliberately making incorrect statements in order to prevent ongoingcriticism of the BJP government for spiking the airline proposal.