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SIA for amendment to Air Corp Act

Puja Mehra

Singapore Airlines, bidder to 40 per cent stake in the state-owned Air-India, has asked the government for an amendment to the Air Corporations Act, 1953.

Section 9 of the Act allows the government to issue directions to Air-India even in the post privatisation regime, which could thwart the new owner's attempt to turn around the airline.

The top government officials told Business Standard that SIA representatives had during informal rounds of negotiations, asked several times for the amendment.

SIA had also expressed concern about employee unrest post-privatisation, akin to that in the case of Balco. Officials said, the Act does not indicate specific circumstances when Section 9 can be invoked, or kinds of instructions that can be issued.

"Section 9 enables the government to ask Air-India to buy and sell particular kinds of aircraft, or even retain or sack an employee," a top government official said.

When contacted, the top aviation ministry officials said that SIA has, however, been told that "the government will look at the amendment in due course of time."

The government is clearly avoiding the amendment as it could snowball into a severe political controversy, they said. Air-India is the only public sector unit that continues to be governed by such an Act, even after it was converted into a public limited company and registered under the Companies Act, 1956.

Air-India is an independent company for which the government does not require such an Act any more, the official added.

The Section allows the government to interfere with the new owner's business decisions. "The Section needs to be viewed in light of the manner in which the Centre and Maharashtra handled the Dabhol Power Company crisis with Enron, where everything had been laid down in black and white," a source said.

"SIA has at no point, formally or informally, asked to be allowed to raise its stake in Air-India to 49 per cent," they added.

Over the past week, there were several reports in the media suggesting an imminent pull out by SIA. Though both, the government and SIA's consortium partners, the Tatas have denied these reports, SIA has refrained from a categorical denial.

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