NEW DELHI, June 16: Jet Airways and Etihad may have to re-work the ownership structure proposed in the Rs 2,058 crore deal with key ministries including Civil Aviation and Corporate Affairs raising concerns over ultimate control of the domestic carrier.
“Major concerns on ultimate control of Jet Airways post deal have been raised by various ministries including Civil Aviation and Corporate Affairs. The issues were voiced at the FIPB meeting held on Friday,” sources said.
The decision on the deal, struck by Jet Airways to sell 24 per cent of its stake to Abu Dhabi’s Etihad Airways, was deferred by the Foreign Investment Promotion Board.
The deal is the largest foreign investment proposal in the aviation sector after the government allowed foreign carriers to pick up stake in Indian airlines last September.
Concerns have been primarily raised on the proposed ownership and control structure of the domestic airlines.
Sources said that capital market regulator Sebi, fair trade regulator CCI and Department of Industrial Policy and Promotion (DIPP) also have reservations about the transaction.
After the FIPB meeting on Friday, Economic Affairs Secretary Arvind Mayaram had said: “It (Jet-Etihad proposal) has been deferred. We need more details on effective control and ownership”.
However, Civil Aviation Minister Ajit Singh had said that he did not “see any major problem for the deal”.
Sources had said that following Sebi’s concerns, the deal was reworked with changes in share purchase agreement and Articles of Association of the company to ensure that effective control of the company was not transferred to Etihad.
Under the Jet-Etihad deal, after the transactions are cleared by the regulatory authorities, Jet Airways promoter Naresh Goyal will directly own 51 per cent in the airline while Etihad will own 24 per cent.
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.
Ahead of the FIPB meet, Jet Airways yesterday named Australian aviation veteran Gary Kenneth Toomey as its new CEO in place of Nikos Kardassis, who had resigned on May 31. (PTI)
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Indian economy is in a
crisis, says NCAER
NEW DELHI, June 16:
The Indian economy is in a crisis with growth slowing down, fiscal and current account deficits running high amid persistent inflation, says a study by an economic think tank.
“The Indian economy is in a crisis. While the growth rate has been declining…The issue (of high CAD) gets amplified against the backdrop of slowing economy, high fiscal deficit and persistent inflation,” National Council of Applied Economic Research said.
India’s Current Account Deficit (CAD) rose to a record 6.7 per cent in the quarter ended December of 2012-13.
Attributing high CAD to GDP ratio slowdown in exports and increase in imports of oil, coal and gold, NCAER said the high CAD requires high foreign investment.
“This might be a risky proposition given the global financial volatility and keeping in view the interests of foreign investors,” it said.
The study said that the persistent increase will lead to macroeconomic risk as it raises concerns about economy’s ability to honour its external payments obligations. “It also affects the confidence of potential lenders and investors.”
The NCAER study said there is a need to boost exports of merchandise and hence lower the deficit on balance of trade.
As per the study, manufacturing in India is still not internationally competitive in several sectors of production.
“Some long-term factors that need attention involve infrastructure, labour laws and governance reforms…Moving to goods and services tax (GST) would add to India’s global competitiveness in manufactured goods,” NCAER said.
It further said India should play a pro-active role in strengthening its trade integration with other Asian nations.
“India’s trade and investment relations with Asia will play a major role in boosting its exports in the Asian century,” the study said.
Also, India should strengthen its bilateral agreements and help bring about foreign trade agreements in groupings such as ASEAN+6 nations, it added.
The six countries outside ASEAN are Australia, China, India, Japan, South Korea and New Zealand. (PTI)
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