The largest foreign direct investment ( FDI) in the Indian aviation sector is at the centre of controversy, with allegations of corruption and favouritism. Much of the debate on the issue may be premature in the wake of pending approvals and permissions.
There are two aspects of the issue which are often confused. First is the debate about the bilateral air service agreement signed by India with Abu Dhabi and the second is the issue of control that this deal may yield to a foreign airline on an Indian carrier. The challenge posed by various factions against the increased seat entitlement under the bilateral air service agreement may not have much bearing on the approval of the deal.
However, the apparent shift of 'control' to Etihad under the deal structure could significantly impact the approvals from the regulators. It is interesting to note that the foreign investment policy and the exchange control policy do not have any guidelines for defining 'control'. In fact, the Foreign Investment Promotion Board (FIPB) has asked Sebi to clarify as to what constitutes effective transfer of control and management. In response, Jet has been directed by Sebi to re-work part of its deal structure, including the shareholders agreement and the commercial co-operation agreement.
14/07/13 Smriti Subramanian & Raghav Shah/Economic Times
To Read the News in full at Source, Click the Headline
There are two aspects of the issue which are often confused. First is the debate about the bilateral air service agreement signed by India with Abu Dhabi and the second is the issue of control that this deal may yield to a foreign airline on an Indian carrier. The challenge posed by various factions against the increased seat entitlement under the bilateral air service agreement may not have much bearing on the approval of the deal.
However, the apparent shift of 'control' to Etihad under the deal structure could significantly impact the approvals from the regulators. It is interesting to note that the foreign investment policy and the exchange control policy do not have any guidelines for defining 'control'. In fact, the Foreign Investment Promotion Board (FIPB) has asked Sebi to clarify as to what constitutes effective transfer of control and management. In response, Jet has been directed by Sebi to re-work part of its deal structure, including the shareholders agreement and the commercial co-operation agreement.
14/07/13 Smriti Subramanian & Raghav Shah/Economic Times
