Aviation ministry fears legal hurdles for AirAsia

First Published: Tue, Mar 12 2013. 10 22 PM IST

 

  The court may not entertain suits against the project based on differences over punctuation but the government should clarify its stand formally to help bring investment into the country, say analysts. Photo: Goh Seng Chong/Bloomberg 

 

Updated: Tue, Mar 12 2013. 10 47 PM IST

New Delhi: Civil aviation ministry officials still see hurdles to plans by AirAsia Bhd and the Tata group to set up a domestic airline in the country, despite the finance ministry’s support for the proposal.

This stems from a debate between the finance and aviation ministries over the wording and punctuation of the cabinet decision under which the project was cleared by the Foreign Investment Promotion Board (FIPB). There doesn’t appear to be anything new in the objections of the aviation ministry, which were expressed at the time of the FIPB approval.

AirAsia India is awaiting a formal communication from FIPB, which comes under the finance ministry, before it seeks a licence from the aviation ministry.

The government allowed overseas carriers to acquire a stake of as much as 49% in Indian airlines in September. The contention of the aviation ministry officials is that this doesn’t cover proposals to start new airlines. The finance ministry says it does.

A group of ministers led by former finance minister Pranab Mukherjee decided the process to allow foreign airlines to invest in Indian carriers on 7 February 2012.

“A separate cabinet note be brought before the cabinet for consideration regarding permitting 49% FDI (foreign direct investment) by the foreign airlines in Indian carriers,” the minutes of the meeting cite Mukherjee as saying. The note has been reviewed by Mint.

The Department of Industrial Policy and Promotion (DIPP) then moved the note, which said that the “ministry of civil aviation has proposed to allow investment by foreign airlines in domestic airlines in domestic carriers up to (the) limit of 49% subject to guidelines of FEMA (Foreign Exchange Management Act).”

An aviation ministry official insisted there the ambiguity in the wording and punctuation could form the basis of legal action against the project.

“Someone can go to court...if there is some discrepancy in this airline FDI policy. What this would do is unnecessarily delay the AirAsia Tata project,” the aviation ministry official said.

A person close to AirAsia, who declined to be named, expressed confidence that the project would come to fruition.

An analyst said the courts may not entertain any suits against the project based on differences over punctuation but the government should clarify its stand formally to help bring investment into the country.

“The courts shouldn’t entertain stalling tactics,” said Mohan Ranganathan, aviation safety expert and member of the government-appointed Civil Aviation Safety Advisory Council. “If the government is serious about the venture and FDI, it doesn’t take long to issue a fresh notification with all the commas they want.

 

 ADITYA KUMAR SINGH

PGDM 2ND SEM