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UPA Ministers differ on bailout for aviation industry

According to a Press Trust of India (PTI) report, the downturn in the aviation sector yesterday brought the differences among UPA ministers into full play on issues like the bailout for the beleaguered industry.

The Labour Ministry convened a tripartite meeting to discuss the sacking of 1,900 Jet Airways employees. “We will seek details of employment and inspect the work contracts of the employees to decide if action can be initiated against the airline,” said a Labour Ministry official from Mumbai. This decision was taken after Union Labour Minister Oscar Fernandes sought and got a report from the Chief Labour Commissioner on the Jet episode.

After yesterday’s meeting of the Union Cabinet a senior minister said that the government had little to do with the internal decision of an airline, and said that Jet Airways did not figure in the Cabinet discussions. But senior ministers differed publicly on the demand of airlines for official succour in the form of massive cuts in taxes and levies, primarily on jet fuel – blamed for the poor financial health of the companies.

Batting for concessions to the ailing sector, Civil Aviation Minister Praful Patel said that unless ministries work together and come out with solutions, there will be no relief. “As a politician, I would also not like anybody to lose jobs,” said Patel. Apparently irked by Patel’s comments that he was disappointed that ministries were not cooperating, Petroleum Minister, Murli Deora hit back by saying that he had helped broker a deal between Jet and Indian Oil Corp for a 60-day fuel credit facility.

“But they have not kept the agreement,” said Deora, adding that Jet had defaulted on payment of Rs 259 crore on bills raised more than two-and-half months back. But Jet said that their payments were being made within the stipulated time. When asked about Patel’s statement R S Pandey, Secretary, Petroleum said, “If there are demands for reduction in taxes, the issue is to be addressed by the Finance Ministry and the respective state governments.”

Deora separately criticised the timing of the decision – the middle of the festival season. “I do not approve of (the retrenchment) you just cannot do such a thing. This is not the right time to retrench people, particularly before Diwali,” said Deora.

Patel further informed that on a personal level he will try to talk to people and see how maximum number of people could be accommodated. But the airlines say they have to protect the employment of 11,000 permanent staff and in that context, the jobs of 2,000 temporary employees may have to foregone. The CPI(M)-affiliated trade union, Centre of Indian Trade Unions (CITU), registered a complaint with the Labour Commissioner’s office in Mumbai regarding the layoffs, while the Aviation Industry Employees’ Guild (AIEG) threatened to boycott the airline across all airports.

Jet Airways, which has struck an operational alliance with Kingfisher Airlines to cut costs, expects the lay-offs to result in savings of USD one million a month. ATF or jet fuel price, which account for a major chunk of airlines’ operating costs, have been reduced twice in two months to Rs 56,447.80 per kilo litres (in Delhi) as of September 30, 2008. But Wolfgang Prock-Schauer, CEO, Jet Airways had said that despite the decrease in ATF prices, the prices remain around 50 per cent higher compared to a year ago.

Despite the deregulation of pricing of ATF on April 1, 2001 the control of supply by government owned oil companies, and ridiculous taxes, ensure that ATF in India is about 170% of the international price. Over the base price, customs duty of 5%, excise duty at 8%, education cess of 3%, and state sales tax at an average of 25% is levied. State taxes and excise duty amounts for about one-third of the price of ATF.

Praful Patel justified the demand for reduction in taxes on fuel by saying that the airline industry was a job creator like any other and needed attention. The government is awaiting the report of an expert group, which is looking into the demand of the industry for a Rs 4,750 crore ($1 billion) bailout package.

About Devesh Agarwal

A electronics and automotive product management, marketing and branding expert, he was awarded a silver medal at the Lockheed Martin innovation competition 2010. He is ranked 6th on Mashable's list of aviation pros on Twitter and in addition to Bangalore Aviation, he has contributed to leading publications like Aviation Week, Conde Nast Traveller India, The Economic Times, and The Mint (a Wall Street Journal content partner). He remains a frequent flier and shares the good, the bad, and the ugly about the Indian aviation industry without fear or favour.

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