Tata Industries has withdrawn its proposal for setting up a Rs 1475 crore domestic airline with 40 per cent equity participation by foreign institutional investors.
After waiting three years, during the course of which the proposal was revised several times, the Tatas finally decided not to pursue the project because of the delay in getting clearance from the civil aviation ministry.
"This is a careful and considered decision. The proposal has been delayed and deferred (for too long). We're not waiting any longer," Sujit Gupta, director, Tata Industries, told reporters here yesterday.
The Tatas have communicated the decision to the civil aviation ministry and to the FIIs they had held preliminary discussions with, American Insurance Group and Government of Singapore Investment Corporation.
"The proposal is withdrawn. This is the last word. There is a no ambiguity in this. Letters have been sent to the ministry," Ajay Kumar, vice-president (communications), Tata Industries, said. "We do not intend to get into a negotiating position with the government," Eric Vaz, manager (projects), added.
Civil aviation minister Ananth Kumar, however, said the government still had an open mind and denied Tatas' charge that his ministry had delayed a decision.
The government had decided to form an expert committee to examine the issue in depth and even now there was scope for entrepreneurs to pursue according to the guidelines and the committee's report, Kumar told PTI in Bangalore. "Foreign participation in domestic aviation is a very sensitive issue and is rigorously monitored the world over," he said.
Announcing the withdrawal, Gupta particularly blamed the civil aviation ministry. "The problems are not caused by the government, but specifically by the ministry of civil aviation," he said.
Gupta also reiterated that there was no change in Tatas' position on the Bangalore airport project. The group has said it will withdraw from the project because of difficulties over getting clearance. "There is no reason for us to review when the circumstances under which we withdrew have not changed," a Tata executive said.
Other Tata executives denied that the decision to withdraw from the airline project was based on restructuring advice from global management consultancy firm, McKinsey & Co. The proposal envisaged domestic investment of Rs 696 crore, foreign investment of Rs 278 crore and employment of 2,400 people by the fifth year.
Aviation industry experts did not find the Tata decision surprising and said it would send negative signals to potential investors.
While the Tatas alleged that the airline had remained on paper "due to the inability of four successive governments to implement their own policies", rivals pointed out that "the failure of the Tatas in conceiving the project correctly was evident from the fact that four governments had been unable to clear it".
