Govt divided over Jet-Etihad deal, cabinet Secretary calls meet

The Cabinet Secretary has called a meeting on Tuesday to discuss the concerns reportedly raised by the Prime Minister's Office (PMO) over the deal between Naresh Goyal-promoted Jet Airways and Abu Dhabi-based Etihad Airways even as the UPA government seems to have divided down the middle over Rs 2,058 crore agreement.

The PMO has sought clarifications from ministries concerned, including Commerce and Industry, on the proposed Jet-Etihad deal.

The deal, largest foreign investment proposal in the aviation sector, is facing regulatory hurdles with various ministries raising major concerns over the ultimate control of Jet Airways post transaction.

Surprisingly though, Civil Aviation Minister Ajit Singh continues to back the deal strongly.

"The deal is going through its regulatory process. It is just an agreement... The bilateral agreement is being signed between India and Abu Dhabi," Singh said.

"We are not doing anything particularly for Jet... Just because we are giving more seats that doesn't mean it becomes a security threat. The number of passengers is growing and Kingfisher is not in function. Someone has to take the bilateral step," he added.

The deal is being questioned because it is not clear about what the ownership structure of Jet Airways would be after the deal. MPs believe Etihad might exercise management control on Jet Airways through a complex ownership structure.

The Foreign Investment Promotion Board (FIPB), which clears FDI proposals, on June 14 had deferred a decision on the deal citing control and ownership issues.

"It (Jet-Etihad proposal) has been deferred. We need more details on effective control and ownership," Economic Affairs Secretary Arvind Mayaram had said.

Under the proposed transaction, Jet would sell its 24 per cent to Etihad Airways.

Concerns have been primarily raised on the proposed ownership and control structure of the domestic airlines.

Besides, capital market regulator Sebi, fair trade watchdog CCI and Department of Industrial Policy and Promotion (DIPP) also have reservations about the deal.

Post transaction, Jet Airways promoter Naresh Goyal would directly own 51 per cent in the airline.

The FDI policy for civil aviation, which was revised in September last year, allows foreign airlines and foreign institutional investors to invest up to 49 per cent in an Indian airline. NRIs are already allowed 100 per cent investment.

Recently, Janata Party President Subramanian Swamy had written to Prime Minister Manmohan Singh raising concerns about the Jet-Etihad deal.

With Headlines Today inputs