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Controversy

Yet Another One

The statements from the civil aviation minister Ajit Singh and the Prime Minister's Office desperately trying to damage-control bring the controversial Jet-Etihad deal back under the scanner once again

Yet Another One
Yet Another One
outlookindia.com
-0001-11-30T00:00:00+05:53

April 24, 2013: India and Abu Dhabi conclude bilateral talks on use of air space for flights and seats, with the government agreeing to approve an unprecedented 36,670 seats on weekly flights 

On the same day, Abu Dhabi’s national carrier Etihad Airways announced its decision to acquire a 24 per cent stake in India’s largest private carrier Jet Airways for Rs 2,058 crore ($379 million).

May 1 2013:  CPI leader Gurudas Dasgupta alleges that the sops were "in fact the price paid by India, for benefitting Jet Airways, as without these licences Etihad was not interested in buying portion of Jet Airways" and says that "cash rich Gulf airline may prevail upon Jet Airways to increase the flight undercutting the tariff and taking over large number of passengers who otherwise would have taken Air India." 

The objections to the deal were first raised by a Parliamentary Standing Committee headed by CPI(M) MP Sitaram Yechury, which was followed up by senior MPs, Jaswant Singh and Dinesh Trivedi in their letters to Prime Minister Manmohan Singh.

May 29, 2013: Janata Party chief Subramanian Swamy writes to the PM:

Dear Prime Minister

I write this letter on the subject of another developing mega fraud that also impinges on India’s national security. This fraud is the so-called Jet Airways-Etihad deal, that has two components—one of enabling Etihad to become entitled by a MoU executed on 24.04.2013 by the Governments of India and UAE [Abu Dhabi] on Bilateral Air Services vastly enhance Etihad’s air traffic, measured by seat capacity, between the two countries. This arbitrarily determined entitlement, tantamount to free provision of India’s sovereign airspace to a foreign airline, hence fraught with serious national security issues, is patently for sweetening the private purchase of Jet Airway’s substantial equity by Etihad.

What is distressing is that the minuted Note signed by Finance Minister Mr. P. Chidambaram dated 22.04.2013 [Annexure 1] reveals that this rocket speed clearance of the deal is on your “direction”. The enclosed Note in Annexure 1, sanitized to delete file notings of officials and signatures [including of FM], is self explanatory.

News media reveal that the inked deal on bilateral air space use is to be cleared by the Cabinet soon upon your return from Japan, and the Etihad equity purchase is to be put up and cleared by the FIPB and signed by the FM around 7.6.2013.

My usually reliable sources abroad tell me that this deal if finally cleared and implemented would destroy Indian airline industry, particularly Air India, and empower a foreign airline and a nation known for money-laundering become a hub of India’s passenger traffic.

That is why the Parliament’s Standing Committee on Transport, Tourism and Culture in its Report submitted early this month on the Ministry of Civil Aviation’s Demand for Grants (2013-14) stated [paras 77-94] that this Bilateral Agreement [now being processed for execution at an uncharacteristic and unprecedented pace], is reconsidered since in it is not in the national interest. The Committee has also recommended [para 94] penalization of Jet Airways for clandestinely selling its London route entitlement to Etihad even before the deal is sealed, and without informing the Government of India.

Therefore if you do not order a comprehensive review of these two interlocking agreements i.e., [1] between GOI and UAE of use of air space for flights and seats offered and [2] purchase of Jet Airways equity, you will be directly responsible for an arbitrary and unreasonable deal in which windfall gains will be made by private and foreign parties at the cost of the nation and hence without any public interest.

Prima facie, this would attract Section 13(1)(d) (iii) of the Prevention of Corruption Act (1988) and make you and some others culpable under the said Section.

The common talk in UAE is that following the Supreme Court’s cancellation of the 2G Spectrum licence of the Etisalat Telecom, which licence was illegally bought by them from Swan Telecom, the illegal beneficiaries from that deal who are highly placed in your government, have sought by this airlines’ deal to mitigate formal and informal losses suffered by Etisalat and hence UAE. In this connection, the undue interest shown by the Chairperson of the National Advisory Council, Ms. Sonia alias Antonia Gandhi, in processing of these two agreements at rocket speed is worthy of notice in the national interest.

If you decide to direct a review of these two aforesaid agreements, I shall happy to assist your government in the entire matter. Otherwise, aggrieved by your disregard of public interest I shall approach the Supreme Court by way of a Public Interest Litigation.

Warm regards,
Yours Sincerely

Subramanian Swamy

Many others protest the deal on similar grounds of a loss to the national carrier and raising national security concerns.

June 2013:  Foreign Investment Promotion Board (FIPB) defers a decision on the deal, saying it required more clarity on control and ownership structure of Jet Airways. Jet Airways chairman Naresh Goyal owns a 51 per cent stake in the airline. 

Jul 1, 2013: Stories appear in press and TV channels that the PMO had sought clarification on the deal as the PM had strong reservations about the deal

Jul 2, 2013: The civil aviation minister pooh-poohs the questions and objections, saying the deal had the PM's endorsement

The PMO's offfice seeks to damage-control and dissociate the PM from the deal by issuing the following statement:

Response to Media Reports on India- UAE (Abu Dhabi) Bilateral Air Services Agreement

There have been media reports over the last few days on the India- UAE (Abu Dhabi) Bilateral Air Services Agreement and on the Jet Airways-Etihad equity stake proposal. Some of these reports have inferred that PMO is playing a role in the Jet Airways-Etihad proposal. 

2. The allegations in some media are factually incorrect and baseless. There is absolutely no disagreement within the government or between the Ministers and Prime Minister on the matter. The Prime Minister is neither washing his hands off the Bilateral Air Services Agreement nor is the Prime Minister's Office trying to do a U-turn on the issue now.
 
Two Different Matters - A Bilateral Air Services Agreement and a Private Equity Stake proposal   

3. There are two distinctly different matters being reported by the media. The first is the enhancement of seat entitlements under a Bilateral Air Services Agreement between India- Abu Dhabi. This is an inter-government agreement on bilateral air traffic seat entitlements and concerns the governments of the two countries. The second is an equity stake proposal between Jet Airways and Etihad which is a private agreement between two private entities. Such agreements, as they involve foreign direct investment, have to be as per the laws of the land and any government policies in place in this regard. Being distinct issues and between different categories of entities, the two matters need to be handled separately without mixing them up. 

Seat Entitlements under the India - UAE (Abu Dhabi) Bilateral Air Services Agreement


4. As far as the Bilateral Air Services Agreement is concerned, the facts are simple. Changes in seat entitlements under Bilateral Air Services Agreements are normally entered into by the Ministry of Civil Aviation with its counterparts in other countries. These changes are done through an MOU and do not need approval at higher levels.
 
5. However, on 22.4.2013, the Minister of Civil Aviation, sought the Prime Minister's clearance for concluding an MOU with Abu Dhabi with a seat entitlement which was different from that recommended by an Inter-Ministerial Group. This is how the matter came up to the Prime Minister's level. The Prime Minister directed the Finance Minister to hold a meeting with the Ministers of Civil Aviation, External Affairs and Commerce & Industry to discuss the matter in detail. The Ministers met and agreed to a proposed mandate for the bilateral negotiations. The Minutes of this meeting, issued by the Finance Minister, refer to this and are annexed.

6. Later on the same day (22.4.2013), the Ministers met the Prime Minister to discuss the matter. This was attended by the NSA and the Principal Secretary to PM. In this meeting, the pros and cons of the enhanced seat entitlement were discussed, including the reasons for the mandate that was being finally given. At the end of the discussions, it was agreed to give an 'in-principle' go ahead to the negotiating team as per the formulation mentioned in the minutes of the earlier meeting. 

7. The Prime Minister subsequently, on 26.4.2013, asked for the matter to be brought to the Cabinet. He even spoke to the Minister of Civil Aviation in this regard. On 29.4.2013, the PMO asked the Ministry of Civil Aviation formally to bring the matter to the Cabinet followed by a reminder on 20.5.2013.  The note sent by PMO is annexed.

8. Subsequently, a note was received in the PMO on the impact of Middle eastern Carriers on our aviation sector. This was sent on 22.5.2013 to the Ministry of Civil Aviation for consideration.

9. When the Cabinet Note was received by PMO, it was felt that the Note should be reformulated to reflect the sequence of events and the discussions more accurately as its current formulation did not explain the detailed examination of the matter that had taken place on 22.4.2013. An accurate description of issues would make it easier for readers of the Cabinet Note to understand the multiplicity of issues that have a bearing on the matter and the reasoning behind the mandate. It was in this context that PMO sent a Note to the Ministry of Civil Aviation on 13.6.2013 to redraft the Cabinet Note. The note sent by PMO is annexed.

Jet Airways Etihad Equity Stake Proposal


10. This is a matter between private parties which needs to be approved by the concerned agencies as per the policies and laws in place. This is not an agreement between governments and there is no question either backtracking from or disowning this proposal as this is not an agreement with the government. 

Complaints about the Agreement

11. The Prime Minister has received the following letters on the matter:

i. Letter from Shri Gurudas Dasgupta dated 1.5.2013

ii. Letter from Shri Prabodh Panda dated 2.5.2013

iii. Letter from Dr. Sucharu Ranjan Haldar, MP dated 3.5.2013

iv. Letter from Dr. Subramanian Swamy dated 29.5.2013

v. Letter from Shri Jaswant Singh, MP dated 31.5.2013

vi. Letter from Shri Ajay Sancheti dated 13.6.2013

vii. Another letter from Shri Ajay Sancheti dated 21.6.2013

12. Some of these letters were related to the India-UAE (Abu Dhabi) Bilateral Air Services Agreement and some were related to the Jet Airways - Etihad equity stake proposal. The action taken on each of these letters is as follows:

i. Matters relating to the Air Services Agreement were referred to the Ministry of Civil Aviation for examination and appropriate action. 

ii. Matters relating to the the Jet Airways - Etihad equity stake were referred to the Ministry of Civil Aviation, Department of Industrial Policy & Promotion, Department of Economic Affairs and the Ministry of Corporate Affairs for examination and appropriate action, as they were concerned with various aspects of the complaints.

iii. Issues raised in the letters relating to security concerns in the context of the FDI policy in Civil Aviation were referred to the Cabinet Secretary for examination to suggest whether there is a need to look into any issues afresh. 

13. As far as the Bilateral Air Services Agreement was concerned, the Cabinet Note was asked to be kept in abeyance till responses on letters with complaints on the agreement and on security concerns were received. 

Conclusions

14. Some of the  facts to be noted from the above are:

i. The Minister of Civil Aviation approached the Prime Minister seeking clearance for concluding the seat entitlement MOU.

ii. The Prime Minister directed the Finance Minister, along with other Ministers, to examine the matter.

iii. After the meeting of the Ministers with the Prime Minister and reaching a common understanding of the basis of their suggestion, it was agreed to give an 'in-principle' go ahead to the negotiating team which went ahead and concluded an MOU.

iv. The Prime Minister directed that the matter be brought to Cabinet much before any of the letters complaining about the seat entitlement enhancement or the Jet-Etihad equity stake were even received.   

v. While the PMO wanted the Cabinet Note modified to reflect the sequence of events and the discussions better, nowhere was there a suggestion to change the decision sought in the note, which is the ex-post facto approval of the MOU.

vi. As for the Jet-Etihad equity stake proposal, this is a matter for consideration by concerned departments and agencies and all complaints were referred to them as per usual practice. 

15. Media reports which selectively report some of the above facts or documents or are not based on full knowledge of facts do not reveal the full picture or the detailed discussions that took place on the bilateral arrangements. As for the equity stake matter, that is a matter still under examination and there is no question of backtracking or disowning it as it is not an agreement with the government.

Appendix Release 02.07.13 by OutlookMagazine

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