Tata-AirAsia JV: Will Ajit Singh throw spanner in works?

Is Aviation Minister Ajit Singh micro-managing the sector too much?

At least for the players, there are reasons to believe he is. When SpiceJet started selling tickets at discounts, ministry officials had expressed their displeasure and even asked other airlines to resist from competing.

Media reports had also suggested that the minister had a say in the aircraft purchases of IndiGo.

Now, he has said that it would have been nice if Tatas could set up an airline on their own, which sounds like a cold response to the three-way joint venture between Tata Sons, Air Asia and Telestra Tradeplace proposed on Wednesday.

[caption id=“attachment_635352” align=“alignleft” width=“380”] even if Singh may want to oppose it, there are other quarters who may strongly favour the investment.[/caption]

“I’m not opposed to the (AirAsia-Tata) alliance… The idea of the policy was to increase investment in Indian carriers. It would have been nice had the Tatas, with their kind of resources, started a new airline,” Singh told the Economic Times in an interview .

These comments definitely go against the spirit of the FDI policy announced by the government. The law allows foreign airlines to pick up 49 percent stake in Indian peers. As long as AirAsia’s proposal does not breach this, there is no reason for any reservations about the joint venture.

This is not to say that the ministry has no authority to do this. It has. And considering the state of affairs in the domestic aviation sector, it is not advisable for the government to step back and watch everything that is going on.

It has to intervene if the situation warrants. Kingfisher Airlines is such a situation. And the ministry has failed miserably in handling it.

Intervening in the fare wars can also be justified, because such unhealthy competition may end up being a recipe for disaster.

But there is no reason to stop somebody from setting up a new company. It is completely the promoters’ prerogative. In the specific case of AirAsia, the venture is also bringing in much needed foreign capital.

It is highly unlikely that he will oppose the deal, given the huge positive response the joint venture announcement has got.

Even Captain Gopinath, whose proposal to set up an airline again is yet to get the government’s approval, has hailed the likely India entry of AirAsia.

In another report in the Economic Times, he has said that the Malaysian no-frills carrier with break the “cosy cartel” in the domestic aviation sector.

“True low-cost carriers stimulate the market and expand the consumer base,” he has been quoted as saying. Even IndiGo has failed to create a new market as it grew by cannibalising rivals, he has said.

So even if Singh may want to oppose it, there are other quarters who may strongly favour the investment.