Rules tweaked to keep Tatas out of aviation

A day after Tata Group chairman Ratan Tata dropped a bombshell by revealing that an unnamed minister had asked for a Rs 15-crore bribe to allow his group to enter the aviation industry (See: Tatas won't bribe their way back into airline business: Ratan Tata), details are beginning to emerge about how successive governments changed rules to keep the Tatas out of aviation.

In 1995 when the Tatas in combination with Singapore Airlines wanted to launch a domestic airline, foreign airlines were already investing in India.

Kuwait Airways and Gulf Air had a 20-per cent stake each in Jet Airways; and the Rs2,000-crore proposal of the Tatas envisioned them holding the majority stake in the proposed carrier, according to a Times of India report.

Interestingly, those foreign airlines were allowed to invest in air taxis as the Air Corporation Act was amended only in 1994 when the then air taxi companies became airlines.

Ratan Tata's proposal never went past the foreign investment promotion board (FIPB), but a group as strong as the Tatas could not be kept out without a valid reason.

So for two years - that is till 1997 – the proposal was kept hanging fire. Then the Deve Gowda government changed the rules, disallowing foreign airlines from investing in Indian carriers. Jet Airways was given a certain timeframe to buy back the 40-per cent from its two foreign airline investors.