dna edit: PM's own blunder

For Prime Minister Manmohan Singh, the mishandling of the Jet-Etihad deal comes just as he was recovering from the scars inflicted by the 2G spectrum allocation scam and was putting in place an ambitious reform agenda for his remaining term in office. In the 2G scam, Manmohan was blamed for not reining in the then telecom minister A Raja’s plan to grant licences at 2001 prices despite harbouring initial misgivings. But a statement issued by the PMO on Tuesday, clarifying media reports hyphenating the Jet-Etihad deal and the India-Abu Dhabi bilateral agreement, indicates that history has repeated.

Despite the PMO raising six serious issues affecting the country’s aviation sector in a meeting on April 22 attended by senior ministers and officials, it yielded to civil aviation minister Ajit Singh’s wish to sign away nearly 37,000 additional seats per week to Abu Dhabi. That the meeting arrived at a consensus in just one day — without detailed study or analysis of the implications for the aviation sector — was unfortunate.

Subsequently, opposition politicians alleged that the bilateral agreement, increasing the number of flights, between India and Abu Dhabi was a sweetener to facilitate the Rs2,058 crore FDI deal in which Etihad picked up a 24 per cent stake in debt-ridden Jet Airways.

What provides grist to the rumour mills was that the Jet-Etihad deal and the bilateral agreement were inked on the same day, April 24.

The issues raised by the PMO were serious. The department of economic affairs, other domestic airlines, airports and private metro operators had objected to the benefits accruing to Abu Dhabi through enhanced seats. They were worried that long-haul air traffic would be diverted to Abu Dhabi and India’s airports and airlines would lose out. But Ajit Singh’s defence has been credible too. With Kingfisher and Air India in sick-mode, international traffic can grow only through such deals, he claimed. Besides all airports in India benefitting from the increased number of Jet-Etihad flights to Abu Dhabi, he emphasised that the ultimate beneficiary was the flyer.

Some of those objecting to the deal worry about Air India’s fate. The government plans to pump in Rs30,000 crore to attempt another revival of Air India which will be locked in direct competition with Jet-Etihad in the North America-Europe-Gulf sectors. Instead of wasting more public money on a losing proposition, the government must progressively dilute its stake in Air India. For private players in the struggling aviation sector, FDI has become the only option after heavily exposed Indian banks turned wary of lending more money. But ushering in FDI must be done with grace and caution. The tearing hurry to attract Etihad without due diligence has only created more problems in its wake.