‘Privatise Air India, bail out Jet Airways’: is it the new Gujarat model?

Barely six months after the BJP accused Congress of offering Vijay Mallya’s Kingfisher Airlines a sweet heart deal to keep it afloat, the Modi Government has asked public sector banks to bail out Jet Airways and save it from bankruptcy.

With Jet Airways grounding two-thirds of its fleet, resulting in cancellation of hundreds of flights, and its pilots threatening to stop working from April 1, the central government’s SOS to PSU banks is meant to prevent loss of jobs ahead of a crucial general election.

Congress on Wednesday took a swipe at the Government and asked why the Modi Government is bailing out a bankrupt, private airline. Fifty-one per cent of Jet Airways is owned by London based NRI Naresh Goyal and 24% is owned by Etihad Airways from Qatar.

Randeep Surjewala, in-charge of the Communications Department of All India Congress Committee, released documents to establish that serious complaints of financial irregularities against Jet Airways had been made to the PMO last year. The State Bank of India consequently started an inquiry in December, 2018 into charges of fraud and siphoning of funds.

According to its balance sheet, Jet Airways has reported a loss of ₹7,400 Crore and its liabilities to PSU banks like SBI and PNB are ₹8,500 Crore.

Following complaints made by a whistle blower, the PMO ordered an inquiry in August, 2018 and the SBI in December, 2018 wrote to the whistle blower and informed that he would be informed about the result of the inquiry.

The SBI also informed the whistle blower that a special forensic audit of Jet Airways had been entrusted to Ernst & Young.

Surjewala wondered aloud whether public money can be used to bail out a private, bankrupt enterprise. The Government’s ‘advice’ to the banks to buy equity shares from Goyal and Etihad, he pointed out, would leave the PSU banks holding the liabilities of another bankrupt business.

The impact of the bail-out will make the banks own a bankrupt airlines while clearing a NRI businessman of his liabilities. The advice to buy the 24% stake owned by Etihad Airways at the rate of ₹150 per share by diverting funds from National Infrastructure Development Fund will adversely affect the Fund.

What is the logic of privatising Air India and at the same time offering a ₹8,500 Crore bail-out package to Jet Airways, Surjewala asked.

The Prime Minister and the Finance Minister need to tell the nation the basis on which the advice has been given and whether a financial valuation of Jet Airways has been done.

Earlier, the Modi Government had forced the PSU ONGC ( Oil & Natural Gas Corporation) to pump in ₹7000 Crore to bail out Gujarat State Petroleum Corporation. Life Insurance Corporation was forced to bail out IDBI bank. Banks have also taken a hit on its investment in IL & FS while perpetrators were allowed to get away.

Is this the new Gujarat model, he sarcastically asked.