Kingfisher:Govt's dog in the manger policy

Is the inactiveness of the Government to save the private airline industry due to the fact that in a free trade regime nothing is free? If you want to do business, it is your business, and government has no business to bail you out, if you have problems. What would happen to its impact on the economy, if kingfisher airlines were to shut stop. Airline group chief and billionaire business tycoon, Vijay Mallya is struggling to keep India’s Kingfisher Airlines afloat due to surging fuel costs and fuel taxes. In the past week, the Bangalore-based carrier has cancelled 200 flights in hopes to reduce its debt from Rs. 6,500 crore (about $1.4 billion) to Rs. 3,000 crore ($600 million). Kingfisher has suffered a loss of Rs.1027 crores ($200 million) in the past fiscal year, adding to its mounting debt. Malaya’s friends in the Industry especially a top industrialist like Rahul Bajaj, wants nothing of it saying the vows of the industrialists are his own, and there can be no intervention. People of the ilk like Rahul Bajaj were the beneficiaries of the license era when they capitalized on the monopoly of two wheeler segment. When globalization set in, Hamara Bajaj became one among the two wheeler segment. What are CII and FICCI doing to assist the friendly airline to come out of the woods? There are captains in the capitalist industries who control India’s industrial economy? They do not bother about the loss of jobs, money going bad as investment would go bad, banks’ debt would remain unpaid, goods and services will suffer, the airline’s closure will affect the flight schedules. There will be overall economic effect which would be disastrous start to the XII Five Year Plan. Aviation sector will remain in chaos. With the national airline, Indian, already in the red, the future of the aviation industry looks to be grim and dim. Kingfisher’s plea for government help and the ailing state of India’s ailing aviation industry has raised some questions why the government still has not lifted its ban on foreign airline investment in India. While recent reports suggest that the government has been considering a plan to open up the aviation market, at present foreign institutional investors are allowed to acquire up to 49% in Indian carriers but foreign airlines are banned from investing directly or indirectly in domestic carriers. Kingfisher has been in favor of lifting the foreign investment ban, while Jet Airways has opposed to it. According to the Associated Chambers of Commerce and Industry of India, allowing foreign direct investment is key in helping the aviation sector, along with cutting fuel taxes and lowering airport charges. With the exception of IndiGo, India airline carriers on the whole seems to be taking a hit. Jet Airways reported a loss of $158 million for the quarter ending September. The airline attributed the loss to high fuel and currency devaluation. Spice Jet also reported a Rs 240 crore (approx $48 million) net loss. The Centre for Asia Pacific Aviation (CAPA) forecasts that the industry needs about $2.5 billion of new cash to maintain operations, including $1.32 billion for the state-owned Air India airlines. Now the airline is seeking a government bailout while members on the Kingfisher board are meeting to explore ways out of their financial turmoil, including a proposal to sell more than half its property. Opposition parties in India, including the Bharatiya Janata Party (BJP), strongly oppose a government bailout package to help the cash-strapped airline. Government is unable to do anything to save Kingfisher. In the meanwhile, Income Tax department, Service Tax department, etc have applied Garnishee orders in the a/cs of Kingfisher in various Banks. Salaries for staff have not been paid. Oil Companies are demanding payment of their dues threatening to stop supplies. The airports are demanding payment of landing and take off charges. In the meanwhile, consortium of Banks has declared Kingfishers’ accounts as Non Performing Assets. Kingfisher is choked from all sides, and government’s punitive action is going to dry out the little Oxygen that is available with the airline to come out of the woods. Government escorted Nedungadi Bank out of death by amalgamating it with Punjab national Bank. Any asset if it is turning useless, we need to provide bail-outs and not take punitive action to scuttle its hold ups even in precarious situation. One suggestion is offered. We have Foreign Exchange Reserves to the tune of $ 300 billion. Half of it is invested in debt bonds and government backed securities begetting meager returns. Why not keep a reserve of $ 30 billion, and provide it on demand to the Indian industry instead of asking them to seek External Commercial Borrowings. Money from this Revolving fund can be lent to commercial enterprises like Kingfisher to bail it out, and in the process of doing so, these idle funds would redeem better interests advantageous to the Indian economy. This does not require any political debate, but the amount of good it can do cannot be quantified. But, who would come to the rescue of Kingfisher in its dire need? The “King of Good Times” is facing some grim times at the moment. But the King in the form of Government is sitting in stoic silence thanks to the precarious political situation of their making?