Woodpecker Air that brew intoxicants: CEA takes dig at Mallya

Kingfisher Airlines, promoted by Vijay Mallya whose other group entities included United Breweries, owe close to Rs 7,000 crore to 17 banks.

In an apparent dig at Kingfisher crisis, chief economic adviser Arvind Subramanian said this was a crisis where owners of some 'Woodpecker Airlines' also made intoxicants at 'Eagle Breweries', but did not pay for the mistakes they committed.

He, however, hinted that the lack of exit mechanisms may be responsible for issues like the debt of Kingfisher Airlines snowballing into big trouble for the banks.

"We have many private sector firms...that should not be in business...efficient firms coming and staying in, and inefficient ones leaving, and that's how an economy becomes very dynamic," he said while speaking to the Mumbai University students.

Posing a question to himself, Subramanian wondered what makes the exit so difficult in the country.

"Interests (of promoters and others in the system), institutions, and ideas -- these are factors that prevent exits from happening," he said, without elaborating.

Without naming long-grounded Kingfisher Airlines, Subramanian illustrated with fictional names what exactly went wrong with the bankrupt airliner.

"Let's say there is a `Woodpecker Airlines'. And say Woodpecker Airlines also makes intoxicants...say Eagle

Breweries. What we find is that Woodpecker Airlines is being very inefficient, but for some reason we haven't been able to make sure that those who ran Woodpecker at that time, they made a lot of mistakes, they haven't actually paid the cost for those mistakes.

"So, that's an example of weak institutions which prevent exit," he said in response to a question on the grounded Kingfisher Airlines and the rising bad loans of the banks.

Kingfisher Airlines, promoted by Vijay Mallya whose other group entities included United Breweries, owe close to Rs 7,000 crore (Rs 70 billion) in principal to 17 banks, mostly state-run lenders.

The Supreme Court will decide on Wednesday whether he could move out of the country following a petition from the banks.