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For flights bonanza,Abu Dhabi offered $50 bn investment

Host of issues are considered when two countries discuss any increase in bilateral agreements.

Written by Mihir Mishra | New Delhi | Published: July 3, 2013 2:21:55 am

An offer by Abu Dhabi to invest about $50 billion in India’s infrastructure sectors in the coming years was one of the key factors that swayed the government’s decision to approve an unprecedented nearly three-fold increase in bilateral entitlements of weekly airline seats between the two destinations,officials claimed Tuesday.

“A host of issues are considered when two countries discuss any increase in bilateral agreements. In this case,a commitment to invest $50 billion in the infrastructure sector of the country by Abu Dhabi was a key reason for us to agree to the increase,” a senior government official said after attending a meeting called by Cabinet Secretary Ajit Seth on the issue Tuesday.

The meeting was called to discuss the deal in the backdrop of objections raised against the proposal by some MPs. The official explained that the ministerial panel had decided in favour of a nearly three-fold increase in seat entitlements in view of Abu Dhabi’s investment assurances in India’s fund-starved infrastructure sector.

The bilateral deal has been linked to Jet Airways’ decision to sell a 24 per cent stake to Abu Dhabi carrier Etihad for Rs 2,058 crore and sparked a controversy.

The row over Etihad’s proposed investment in Jet comes at a time when the government is trying to woo investors from the Middle-East through measures that include a bilateral investment pact and the liberalisation of investment norms. The UAE is one of India’s largest trading partners and the total trade between the two touched $74.7 billion in 2012-13.

The official said the Inter-Ministerial Group (IMG) on bilaterals had initially approved adding 26,000 weekly seats to the existing 13,000 weekly seats between India and Abu Dhabi.

“The increase was arrived at based on the request for a hike in entitlements made by various carriers,including Jet. Jet has asked for an increase in entitlements by 42,000 seats and the rest of the Indian carriers had asked for around 13,000 weekly seats,” the official explained.

Further,on orders from the Prime Minister,the matter was discussed by a Group of Ministers with the civil aviation minister,the finance minister,the external affairs minister and the commerce minister as members.

“This group then gave a go-ahead to increase the additional bilateral entitlements from 26,000 seats to 40,000 seats. During the negotiations,the bilateral increase was limited to 36,600 seats and no new destinations were given,” the official clarified. At the GoM stage,the investment commitment by Abu Dhabi was the key determining factor,he said.

At Tuesday’s meeting,the civil aviation ministry also informed the cabinet secretary that there are no security threats due to the Jet-Etihad deal. “The civil aviation ministry representatives said that Etihad has been operating into the country for the last many years and there is no security threat to the country. As far as using Jet Airways’ fleet during a war is concerned,the defence forces can takeover public and private assets for its use during an emergency,” said the government official,adding that the concern over effective control is being looked at separately by the Securities and Exchange Board of India.

Earlier in the day,Civil Aviation Minister Ajit Singh threw his weight behind the deal,saying those opposing it were “long on politics and short on facts”.

“It is such an important deal…the first big deal in civil aviation ministry. In terms of FDI,it is bigger than any other deal this year. There are so many dimensions to it. Those opposing the deal are long on politics and short on facts,” Singh told reporters.

The PMO also issued a clarification Tuesday saying the stake-sale issue was still under examination and concerns raised about it had been referred to the relevant ministries. It also asserted that there were no differences within the government over the air services agreement between India and Abu Dhabi.

The clarification came amid increasing objections to the deal,first from a Parliamentary Standing Committee headed by CPI(M) MP Sitaram Yechury,and then by senior MPs Jaswant Singh and Dinesh Trivedi,and Janata Party chief Subramanian Swamy,who is believed to have written to Prime Minister Manmohan Singh.

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