November 28th, 2000, 11:18 AM
Want to start a full-fledged airline? And you have neither experience nor money? Doesn't matter, if you have the right connections, even a seed capital of Rs 1 lakh may be good enough.
One of the most hotly discussed stories in the corridors of the Aviation Ministry at Rajiv Gandhi Bhavan pertains to one such case. Ex-Sahara liason officer and representative of Singapore Airlines, UK Air and KLM, Neera Radia has confounded ministry officials by her application to set up a scheduled airline even though she has hardly any credentials.
Sources say she has the support of Tourism and Culture Minister Ananth Kumar who once headed the Aviation Ministry.
Radia applied for a Foreign Investment Promotion Board (FIPB) clearance in July and got it within a month on August 24 to set up a scheduled airline.
Since the FIPB's job is to encourage Foreign Direct Investment (FDI) and Radia was offering to bring in the same, Commerce Minister Murasoli Maran found nothing wrong in it.
Armed with an FIPB clearance, Radia's firm Crown Express applied to the Aircraft Acquisition Committee (AAC) to get a license to acquire six aircraft from abroad to operate a regular domestic airline service like Jet and Sahara.
The AAC, headed by Sunil Arora, managing director of Indian Airlines and joint secretary in the Civil Aviation Ministry, held its meeting on November 10 to consider Radia's request. Sources say that so powerful is her clout that instead of throwing her application out of the window, the AAC sought certain clarifications.
Says Arora: ``If there is liberalisation, there's bound to be competition. But, of course, every case has to be considered by the AAC strictly on merit and as per existing rules and guidelines.''
When contacted, Radia told The Indian Express that she had applied for the license but declined to give details. A senior official who attended the meeting, however, said that there were several discrepancies in her application.
The discrepancy was that Crown Express's total seed money at the time of its application was only Rs 1 lakh. It gave no clue of sources of funds to be brought in from abroad to conform to the minimum share capital norm of Rs 30 crore.
Crown Express said its total project was worth Rs 133 crore and it would raise the share capital to Rs 111 crore instead of Rs 30 crore as is required. However, Crown Express -- which made a presentation before the AAC -- argued that equity would be enhanced from Rs 1 lakh to Rs 30 crore the moment it received the No Objection Certificate (NOC). And that it would bring in 60 per cent of equity with the remaining 40 per cent coming from foreign institutions.
Crown Express claimed that without an NOC, no useful purpose would be served by raising the share capital to Rs 30 crore.
It was also stated that even after the NOC, the Civil Aviation Ministry could still withhold the Air Operators' Certificate (AOC) if the required capital wasn't brought in.
The cost of six 737 aircraft is estimated to Rs 500 crore. However, Radia who had been in the aircraft leasing business for long, submitted that if she could get aircraft on lease for other companies, she could do so for her company as well. She need not own them all.
Sources in Rajiv Gandhi Bhawan say there is neither any policy nor precedent where an NOC has been issued before the source of funding is disclosed. Though some officials present at the meeting were inclined to issue an NOC on the spot, it was opposed by a senior DGCA official.
Some AAC members felt that if the source of funding and share capital was not disclosed, the NOC could pave the way of entry to foreign airlines in the domestic sector through the backdoor.
As per norms, any NRI can set up an airlines for flying within India provided he is an Indian. No foreign equity is allowed in domestic air business.
More at: http://www.expressindia.com/ie/daily/20001128/ibu28062.html
One of the most hotly discussed stories in the corridors of the Aviation Ministry at Rajiv Gandhi Bhavan pertains to one such case. Ex-Sahara liason officer and representative of Singapore Airlines, UK Air and KLM, Neera Radia has confounded ministry officials by her application to set up a scheduled airline even though she has hardly any credentials.
Sources say she has the support of Tourism and Culture Minister Ananth Kumar who once headed the Aviation Ministry.
Radia applied for a Foreign Investment Promotion Board (FIPB) clearance in July and got it within a month on August 24 to set up a scheduled airline.
Since the FIPB's job is to encourage Foreign Direct Investment (FDI) and Radia was offering to bring in the same, Commerce Minister Murasoli Maran found nothing wrong in it.
Armed with an FIPB clearance, Radia's firm Crown Express applied to the Aircraft Acquisition Committee (AAC) to get a license to acquire six aircraft from abroad to operate a regular domestic airline service like Jet and Sahara.
The AAC, headed by Sunil Arora, managing director of Indian Airlines and joint secretary in the Civil Aviation Ministry, held its meeting on November 10 to consider Radia's request. Sources say that so powerful is her clout that instead of throwing her application out of the window, the AAC sought certain clarifications.
Says Arora: ``If there is liberalisation, there's bound to be competition. But, of course, every case has to be considered by the AAC strictly on merit and as per existing rules and guidelines.''
When contacted, Radia told The Indian Express that she had applied for the license but declined to give details. A senior official who attended the meeting, however, said that there were several discrepancies in her application.
The discrepancy was that Crown Express's total seed money at the time of its application was only Rs 1 lakh. It gave no clue of sources of funds to be brought in from abroad to conform to the minimum share capital norm of Rs 30 crore.
Crown Express said its total project was worth Rs 133 crore and it would raise the share capital to Rs 111 crore instead of Rs 30 crore as is required. However, Crown Express -- which made a presentation before the AAC -- argued that equity would be enhanced from Rs 1 lakh to Rs 30 crore the moment it received the No Objection Certificate (NOC). And that it would bring in 60 per cent of equity with the remaining 40 per cent coming from foreign institutions.
Crown Express claimed that without an NOC, no useful purpose would be served by raising the share capital to Rs 30 crore.
It was also stated that even after the NOC, the Civil Aviation Ministry could still withhold the Air Operators' Certificate (AOC) if the required capital wasn't brought in.
The cost of six 737 aircraft is estimated to Rs 500 crore. However, Radia who had been in the aircraft leasing business for long, submitted that if she could get aircraft on lease for other companies, she could do so for her company as well. She need not own them all.
Sources in Rajiv Gandhi Bhawan say there is neither any policy nor precedent where an NOC has been issued before the source of funding is disclosed. Though some officials present at the meeting were inclined to issue an NOC on the spot, it was opposed by a senior DGCA official.
Some AAC members felt that if the source of funding and share capital was not disclosed, the NOC could pave the way of entry to foreign airlines in the domestic sector through the backdoor.
As per norms, any NRI can set up an airlines for flying within India provided he is an Indian. No foreign equity is allowed in domestic air business.
More at: http://www.expressindia.com/ie/daily/20001128/ibu28062.html