Discrepancies between the original proposal and the one that was presented before the Foreign Investment Promotion Board (FIPB) made the Civil Aviation Ministry red flag Etihad’s proposal to acquire a stake in Jet Airways.

A senior Ministry official told Business Line that in the original proposal, Jet Airways had said that one-third of its board members would be Indians, which was one of the requirements of Indian law.

“But when the proposal was taken up by FIPB last Friday, it was noticed that there was no clarity on whether the requirements of Indian law were being met by the airline. There was also confusion on whether the place of origin of business would change as Jet had indicated that some key decisions will be taken in Abu Dhabi,” a senior Ministry official said, explaining the reason behind deferring the proposal.

Officials added that the Indian Civil Aviation Requirement, the basic requirement for operating an airline in India, required the airline to keep the aviation authorities informed of any changes made in any proposal.

The primary concern for the Ministry is that if key decisions about an airline registered in India were taken in Abu Dhabi, then it will be difficult for the Indian Government to pull up the airline if any problem is discovered later.

In April, the Abu Dhabi-based national airline, Etihad, acquired a 24 per cent stake in Jet Airways for a little over Rs 2,500 crore.

The proposal, which has been cleared by the airline extraordinary general meeting, will need to be cleared by FIPB, the nodal Government agency for allowing foreign investments in the country, the Competition Commission of India and also the Cabinet Committee on Economic Affairs, before it is finally sealed.

ashwini.phadnis@thehindu.co.in

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