Rajeev Deshpande/TNN
New Delhi, Oct 17: The PMO is not inclined to view the demand of the airline industry for a mega-bailout package favourably as it feels such a measure is not called for, given the overall numbers involved. Besides, it would set a precedent for similar rescue pleas from other sectors hit by the global financial whirlwind.
The demand for a bailout, put forward by the Federation of Indian Airlines, adds up to Rs 4,700 crore, or about $1 billion. Now, the job cuts at Jet Airways have seen the government being subjected to a fresh round of lobbying by industry. Aviation minister Praful Patel has also pushed the case of the private carriers, saying that if the sector is to be prevented from going into a tailspin, its financial demands have to be addressed.
Civil aviation minister Praful Patel has expressed disappointment that the finance and oil ministers had not been "sympathetic" to the sector's woes. Oil minister Murli Deora hit back, saying the airlines had already been given credit by the state oil firms that this could not be extended indefinitely. He pointed out that the oil firms had been experiencing a very difficult patch and their finances were hardly in the pink of health.
Well-placed sources said the government believed that bailouts for the private sector airline industry would raise some policy issues. Already, two major airlines — Jet and Kingfisher — owe Rs 2,024 crore to state oil marketing firms. And if a package was prepared for the aviation sector, demands by other segments could not be ignored. It would be difficult to argue that the woes of a particular sector were more urgent.
At a time when the government was trying to entertain state-run enterprises to become more competitive, a bailout for the private sector would be bad policy. Also, so far, the assistance offered to the banking system was by way of increased money supply, easing of credit norms and special windows for borrowing at reduced rates — none of these measures constituted a bailout. It is pointed out that some adjustments in terms of duty cuts or deferred payments were possible, but no wholesale rescue operation was on the cards.