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The proposal of the Abu Dhabi-based Etihad Airways to acquire a 24 per cent stake in Jet Airways failed to get the approval of the Foreign Investment Promotion Board (FIPB) here on Friday.
“The Jet-Etihad proposal has been deferred. We need more details of effective control and ownership,” Secretary, Department of Economic Affairs, Arvind Mayaram, who chaired the meeting, told newspersons. Etihad acquired a 24 per cent stake in Jet Airways for over Rs 2,000 crore in April.
In an informal chat with newspersons, Civil Aviation Minister Ajit Singh said the Securities and Exchange Board of India has asked the Jet-Etihad combine to alter some parts of the pact. The Minister, however, declined to get into specifics.
Senior Government officials who attended the meeting of the apex inter-ministerial group on overseas investments said the other reasons being cited for the proposal being deferred include the Ministry of Company Affairs seeking more time to look into the documents that had been submitted, and questions about the principal place of business of the airlines. Also, the issue of whether the new entity will meet all the domestic civil aviation requirements was raised.
Jet Airways promoter, Naresh Goyal’s NRI status, reported by Business Line earlier this week, was also said to be among the reasons for the proposal being deferred. The Department of Industrial Policy and Promotion is examining whether the NRI stake should be included in the FDI calculation for the civil aviation sector. If it decides to, the Jet-Etihad proposal will breach the 49 per cent FDI limit for the sector and will have to be re-drafted. Incidentally, some of the issues raised on Friday were also communicated to the Civil Aviation Ministry in a letter that Air India sent in January.
The Air India letter pointed out that if the West Asian carrier picks up a majority stake in Jet, most of the decisions on Jet’s future plans would be driven by the foreign carrier.
The buyout will still need to be cleared by the Competition Commission of India and the Cabinet Committee on Economic Affairs.
Jet Airways entered into an agreement with Etihad after the Government allowed foreign airlines to invest in Indian carriers. The Jet-Etihad announcement came days after the FIPB approved a proposal for Malaysia-based low-cost airline AirAsia to form a joint venture with the Tata Group and Telestra for setting up a domestic airline.
Jet Airways stock closed 8.47 per cent higher on the BSE on Friday.
ashwini.phadnis@thehindu.co.in
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