Key members of government sought to address emirate’s gripes over investing in India after the Etisalat issue
First Published: Fri, Jul 05 2013. 07 39 AM IST
New Delhi: Did India rush through the controversial flying rights agreement with Abu Dhabi in an effort to placate the emirate that was upset over having to write off its substantial investment in telecom in the country?
A correspondence trail that has come to light indicates that key members of the Indian government were very keen on ensuring that the deal be helped along in any way possible in order that commercial relations with the emirate could be restored.
Documents reviewed by Mint suggest that the Indian ambassador to the emirate, in a letter to the civil aviation ministry, had recommended this.
Letters to Sheikh Hamed bin Zayed Al Nahyan, managing director of Abu Dhabi Investment Authority and a member of the ruling family, from India’s trade minister Anand Sharma and to foreign minister Sheikh Abdullah bin Zayed Al Nahyan from India’s external affairs minister Salman Khurshid expressed a desire to engage with the emirate on discussions related to investments in the civil aviation sector.
The letters by the ministers were written in early April and that by ambassador M.K. Lokesh on 21 April. India allowed investments in Indian airlines by foreign airlines in September last year.
On 24 April, India allowed Abu Dhabi to increase the number of flights its airline Etihad Airways PJSC operated to and from India.
On the same day, Etihad signed a deal to take a 24% stake in Jet Airways (India) Ltd for $379 million. That deal, which has since turned controversial, is currently winding its way through the regulatory process in India even as several members of Parliament and other politicians have written to the Prime Minister that allowing a foreign airline to take a stake in and management control of an Indian airline is a security threat.
The flying rights agreement has also come under scrutiny with reports that the government rushed it through, and a statement by the Prime Minister’s Office (PMO) explained the chronology of events that led to an important agreement being cleared in two days. The PMO and the civil aviation ministry have been trying to ensure that accusations of policy measures being rushed through to benefit the companies don’t stick to either of them.
To be sure, ambassadors do write letters of the sort written by the Indian ambassador to Abu Dhabi, pushing the commercial interests of the countries where they are posted, and ministers do respond positively to proposals regarding investments in their country, as Sharma and Khurshid did.
Ambassadors and ministers will seek to push trade and economic ties—that’s their job, said Steve Forte, former chief executive of Jet Airways.
“On the one hand the law to allow foreign airlines participation was passed and now someone is getting cold feet,” he said.
Text messages sent to spokespersons of the commerce and external affairs ministries seeking comments on the letters did not elicit any response on Thursday. An email sent to ambassador Lokesh did not receive an immediate reply either.
Still, it is clear from the letters that, within the Indian government, the momentum was very much in favour of a deal taking place.
On 15 April, M.K. Lokesh, India’s ambassador to Abu Dhabi, wrote a two-page letter to India’s aviation and external affairs ministries on the United Arab Emirates’ (UAE) gripes against India.
“The UAE has recently suffered some setbacks with regard to their investments in India. For instance, they had to write off $1 billion of their investment consequent to cancellation of 2G (telecom) licences. Their investment in the Neyveli power plant is also facing problems on account of dues of over $100 million by the Tamil Nadu government,” according to the letter.
“In this context, the UAE government has hinted that any further investments by their sovereign funds and other entities would be considered only after the conclusion of the BIPPA (bilateral investment promotion and protection agreement),” Lokesh wrote. “In this context, both the external affairs minister and commerce and industry minister had written to the UAE government, assuring them that they would address their concerns expeditiously. They also assured that the UAE demand for additional seats in the civil aviation sector will be considered favorably.”
Abu Dhabi Investment Authority (ADIA) has a corpus of $800 billion to invest, he said.
“There is no doubt that some of the recent events, as mentioned above have cast a shadow over further investments from UAE to India,” he said. “In the context of the above, a favourable consideration of the request from the Abu Dhabi authorities for additional capacity allocation for their carrier will go a long way in alleviating their concerns for clearing the way for further investments from UAE to India.”
Commerce minister Sharma had already held conversations with Abu Dhabi Investment Authority’s Al Nahyan, before the Ambassador wrote his letter.
On 5 April, Sharma wrote to Al Nahyan about their talks during his visit to UAE in February.
“We had the opportunity for a candid exchange of views and I have taken on board your key concerns on future investments. I can assure you that investments made by UAE under the extant FDI (foreign direct investment) policy will be secure under Indian law,” Sharma said.
“We welcome UAE investments in all sectors of Indian economy including infrastructure and aviation. I recall that you have expressed strong interest in resumption of negotiations on bilateral investment promotion and protection agreement and this matter has engaged serious attention of our government at the highest level, I have taken up both with finance minister (P. Chidambaram) and Prime Minister (Manmohan Singh) and I am confident that we will be able to reach an understanding soon.”
This was followed by a 9 April letter by Khurshid in the week he spoke with the UAE foreign minister.
“I would like to assure you that we are addressing our various pending bilateral issues in accordance with the road map laid down for that purpose,” Khurshid wrote.
Khurshid’s letter indicates that India was hesitant about a country-specific trade protection agreement.
“With specific reference to the India-UAE bilateral investment promotion and protection agreement (BIPPA), I would like to inform you that we are currently in the process of finalizing a universal template for this agreement with a view to best serve the interests of all stakeholders including foreign investors,” Khurshid said. “India would be happy to consider a standalone India-UAE BIPPA pending finalization of the universal template.”
Khurshid added that it was important to maintain investment momentum.
“We believe that we should sustain and nurture the investment momentum including in the aviation sector and let our relations continue to grow at their natural strategic pace for the mutual benefit of our peoples. I understand that our minister of civil aviation will be in touch with his counterpart in due course,” he said.
The air services talks between the two countries were originally scheduled for 23 April.
Ambassador Lokesh wrote to the aviation and commerce ministry on 21 April, two days before the delegation from India was to arrive in Abu Dhabi to start negotiations, about his meeting with the Abu Dhabi Investment Authority’s Al Nahyan that day.
The forthcoming talks on aviation “were important in giving them confidence to move ahead on investments in India”, Lokesh said.
“It is recommended that the negotiating team should come with positive approach as assured by (the foreign and trade ministers) in their letters...” he wrote.
On 22 April, at the direction of the Prime Minister, Chidambaram had called a meeting of Khurshid, Sharma and aviation minister Ajit Singh in the capital on the negotiating team’s mandate for the Abu Dhabi talks. They were allowed to offer up to 40,000 seats, code share agreements and any other terms that would benefit the country, Mint reported on 8 May, based on the minutes of the meeting.
The talks couldn’t be concluded on 23 April and spilled over to the next day, when they concluded and the agreement was signed. Only hours before, Etihad and Jet had announced their agreement after four months of talks.
Janata Party leader Subramanian Swamy’s letter to the Prime Minister, which raised the security concerns issue, also pointed to the Etisalat as being a contributory factor. It said people “highly placed in your government, have sought by this airlines’ deal to mitigate formal and informal losses suffered by Etisalat and hence UAE”.
Etisalat’s licence was cancelled following a ruling by the Supreme Court in early 2012 that terminated the licences of 122 telcos issued in 2008 in what is now called the 2G scam.
Source: http://www.livemint.com/Politics/hT4DPjGDDUPX9V3tAQwvFK/Letters-show-bid-to-address-UAE-concerns-on-Indian-investmen.html
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