CommMin intervenes to ease Jet-Etihad deal through

The Jet-Etihad deal may be facing headwinds on several issues, including effective control. But thanks to a forceful policy intervention by commerce and industry minister Anand Sharma, the proposed JV will not face any problems when it comes to NRI Naresh Goyal’s investments in Jet Airways, report CNBC-TV18's Rituparna Bhuyan and Siddharth Zarabi.

Even as the back-and-forth on the proposed Jet-Etihad deal was getting played out in mid-June, CNBC TV18 learnt that officials of the Department of Industrial Policy and Promotion (DIPP) raised red flags on the deal.
DIPP joint secretary Anjali Prasad, in a note to DIPP secretary Saurabh Chandra on June 14, raised a query on whether equity investments by a non-resident Indian (NRI) in a scheduled civil airline was de-linked from the overall FDI cap of 49 per cent.
The first option was to link NRI investment in a JV with a foreign airline to the 49-percent FDI cap. The second option was to allow NRIs enjoy the special dispensation enjoyed prior to allowing foreign airlines to invest in the aviation sector. This dispensation, available since 2000, allowed NRIs to have a 100-percent stake, in scheduled Indian carriers.
Consequently, on June 14, DIPP secretary Chandra opined, “Regarding the FDI limits, the matter could be considered by the interagency group which considered the issue prior to the policy amendments, but did not address the issue.”
This could be read as a suggestion for more clarity at the inter-ministerial level, especially because the “inter-agency” group that had considered the issue, prior to the FDI limit hike of 49 percent, had not addressed the matter of the NRI dispensation policy carve-out.
A day later, Sharma overruled Chandra by maintaining that the NRI special dispensation continued even after the liberalisation of the policy. Sharma wrote, “Formulation and interpretation of FDI policy is the remit of DIPP and no role has been envisaged for any inter-agency group”. He added, “A distinct dispensation has been envisaged for NRI investment in civil aviation sector up to 100 percent ever since the sector was opened up for foreign investment in the year 2000”… “It was certainly not the intention of the Cabinet to take a regressive step by withdrawing the dispensation for NRIs.”
With the FIPB likely to consider the Jet-Etihad application at its meeting on 29 July, Sharma’s interpretation of the FDI policy and opinion on the compatibility of each case will be put to the test.