Tata Airline Grounded On Foreign Stake In Fis

The civil aviation ministry has raised three concerns against clearance for the Tata airline proposal including the issue of providing proof that no foreign airline hold a stake in the financial institutions the Tata's propose to tie up with, the concerns raised by the unions and members of Parliament and the capacity issue in the domestic aviation scene.

On Saturday, the FIPB deferred the proposal to October 10 since the aviation ministry sought this deferment and said that it was forming an expert committee to study the proposal in detail. A letter by the aviation ministry to the FIPB raised these three issues and said that it needed time to examine these. The composition of the committee has not yet been finalised but is expected to comprise of retired bureaucrats and experts in the civil aviation sector.

Sources also said that earlier the ministry had raised concerns like the amount of technical fees the Tatas propose to pay to Singapore airlines for its technical assistance have in the past been questioned. It had then been suggested that financial advisor in the ministry P.K. Brahma should be asked to look at this issue.

Sources had pointed out even then that this was an issue for the Reserve Bank of India (RBI) to look into and that the aviation ministry need not go into the issue of royalty payments for technical assitance. Ministry sources however conceded that these were just delaying tactics. Said an official :"This project is now a political issue and out of the hands of the aviation ministry". Sources confirmed that the Tata's have in turn agreed to comply with the latest guidelines and have specified in a detailed letter to the ministry that the new company will be registered and have its in principle operations in India. It has also said that the chairman and two third of the board of directors will be Indian. "No substantive issues really exist and the committee is a just a delaying tactic", pointed outr when compared with IA's own fleet of 56 planes and Jet's fleet of around 22 which will be growing as per their plans and approvals taken from the ministry. It was also argued that the ministry of civil aviation has estimated that traffic growth over the next five years will be an average of 10 per cent and an additional 47 aircraft of 127 seater capacity will be required for five years starting 1998. Further, the capacity was also reduced by the closure of Modiluft, Damania and East West airlines.