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Hindujas to get last hearing on Indian airline bid

The government said on Tuesday the billionaire Hinduja brothers will have a final chance to say why they should be allowed to bid for two state-run airlines after being disqualified by a cabinet panel on security grounds.

Privatisation secretary Pradip Baijal told Reuters that the brothers -- three of whom face arms kickback charges in India -- would be served with a "show-cause" notice. The notice is the last step under government procedures before any final move to disqualify them.

"We will serve the show-cause notice today (Tuesday) or tomorrow (Wednesday). They will be asked to show cause why they should be allowed to continue with their bids," he said.

The tycoons were ruled out of the bidding for international airline Air India and domestic operator Indian Airlines by the security committee in early July because of security concerns.

The three accused brothers, two of whom are British and a third is a Swiss national, deny receiving illegal payments from Sweden's Bofors in a $1.2 billion arms sale to the Indian army in 1986.

Privatisation Minister Arun Shourie said earlier this month "on the Hindujas the view was if you've been charge-sheeted it wouldn't be right to hand over a large concern, an aviation firm, to such a company". But he said they would get a hearing in line with government procedure before a final decision.

His statement came after the government announced new eligibility rules for companies bidding for state enterprises under which any firm or sister concern charged or convicted in a security-related matter would be disqualified from bidding.

The Hindujas, whose interests span media, banking and oil, have submitted technical bids for Air India and Indian Airlines. The government was offering a 40 per cent stake in Air India and a 26 per cent stake in Indian Airlines.

New Delhi has yet to call for final bids. The high-profile sales, seen as a litmus test of the government's commitment to privatisation under its economic liberalisation drive, were slated to be completed by year-end.

Two bidders applied for Air India -- Singapore Airlines, bidding in tandem with India's Tata group -- and the Hindujas. The government has said it will proceed with the sale of Air India even if only one bidding group is left.

For the 26 per cent stake offered for Indian Airlines, the government received bids from Videocon International, a domestic home electronics company, and the Hindujas.

Videocon withdrew from the Indian Airlines race after the Securities and Exchange Board of India barred it from raising capital for three years following a probe into alleged manipulation of its shares.

This left only the Hindujas in the fray for the airline, which flies mostly on domestic routes.

Baijal said the government had three choices in the case of Indian Airlines. "One is to go in for a public issue, or re-tender or let the airline continue as it is. But re-tendering will throw up the same bidders," he said, adding the government had not decided which route to follow.

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