UPA rushing to clear Tata-SIA deal, will Bhatia throw spanner?

The pact between the Tatas and Singapore Airlines could not have come at a more opportune time for the United Progressive Alliance.

Allegations are flying thick and fast that the civil aviation ministry sweetened the Jet Airways-Etihad stake deal with an air service agreement with Abu Dhabi; there is all round pessimism about the economy; and, to top it all, critics have been flaying the UPA-II for delayed decision making on issues related to business.

[caption id=“attachment_1127363” align=“alignright” width=“380”]  It is the UPA and Ajit Singh who have 100 percent interest in the ventures. AFP[/caption]

The Tata group’s deal with SIA, which comes after its similar agreement AirAsia, should help the UPA to save its face on some of these count.

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For one, it shows that investors are interested in India story. Two major recent deals have happened in the aviation sector. If there is interest in this much-battered sector, doesn’t it mean it is not all over for the economy?

The government seems to be jumping with enthusiasm to cash in on this. According to a report in the Times of India, the government is pushing for early clearance, as was the case with Tata-AirAsia deal, so that the UPA-II can take credit for setting up the new airline.

The officials are working to ensure that the airline takes off within the remaining tenure of the UPA. They hope the deals will allow them to make good for the negative news flow from the sector over the last few years, when three airlines were grounded and debt mounted on others.

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However, it remains to be seen how much the UPA will be able to take advantage of the deals. One reason is the displeasure expressed by Arun Bhatia of Telstra Tradeplace, which is a partner in the Tata-AirAsia joint venture.

The government sees no conflict interest in the two deals. One of the officials quoted in the ToI story equates the Tata-AirAsia JV to the Nano and the Tata-SIA venture to JLR of Indian aviation.

But Bhatia is not enthused. “I cannot say anything on this right now” he told Firstpost when asked whether he would walk away from the JV with AirAsia and Tata .

“The AirAsia India board of directors is scheduled to meet on September 28, where all these things will be discussed,” he said.

However, a report in the Economic Times today said Bhatia has no plans to exit the venture but would not mind buying out Tata stake in it.

There is no reason to believe that the Tatas will be ready to give away the stake. For one, it has been a long held ambition for the group to return to aviation. Why would it sell the stake even before the JV is set up?

The Bhatias own 21 percent, the Tatas 30 percent and AirAsia the balance 49 percent in the three-way joint venture. In the full service JV, the Tatas own 51 percent and SIA 49 percent.

But it is the UPA and Ajit Singh who have 100 percent interest in the ventures. They physically own nothing, though.