The government had not only denied foreign ownership in Indian carriers but also prevented strong Indian companies like the Tatas from entering private airline industry even though it declared it open to private sector participation.

Only weaklings like ModiLuft, Damania Airways and NEPC were allowed to enter and these weaklings never posed a real threat to the virtual monopoly of Indian Airlines. This suited the government, its bureaucrats, Indian Airlines, its employees and its trade unions. Jet Airways was forced to shed the equitystakes of Gulf Air and Kuwait Airways in it because of the government policy.

The weak airline companies who entered with big game plans soon folded up because of mismanagement and inability to face competition from Indian Airlines which enjoyed total patronage of the government. These airline companies were unable even to foot the bill of their caterers. Their aircrafts which were taken on lease from big American companies were grounded and confiscated because of lease rent default. Bankers limited their lending to these private airlines with the sole exception of the controversial Indian Bank whose erstwhile CMD M Gopalkrishnan indiscriminately lent Rs 105 crore to East West Airlines as against the company's eligible limit of only Rs 5 crore.

ModiLuft attracted everybody's attention because of its partnership with the German airliner Lufthansa. But the partnership collapsed in 1996. Now ModiLuft is trying to rise from the ashes.

Even though airline companies like ModiLuft and East West Airlines hadtotally collapsed, the Director General of Civil Aviation (DGCA) accorded a six month extension to their licence instead of terminating it. The defunct airline companies sought more time from the DGCA for finalising their aircraft acquisition plans and DGCA has granted them further time. DGCA had not bothered about the credibility of these airline companies while taking the decision, it seems. Knowing fully well the past track record of these companies, who will lease their aircrafts to them? Moreover the lease rentals had gone up now and will threaten the viability of operations of these sick units. Even the listed phones of these companies had been disconnected, but our DGCA has immense trust in them.

In the meanwhile there are rumours that the wholly owned subsidiary of British Airways, Speedwings has taken over ModiLuft. But British Airways is telling that there is only a technical contract between its subsidiary and ModiLuft. The rumour could not have been true because of government's policy of banningforeign entry into airline business in India. There is another possibility, however. Even though the government rules prohibit foreign firms from investing in Indian carriers, the terms of the contract could be phrased in such a way to avoid using the word `takeover'. For practical purposes, the operations could be handed over to Speedwing who will also take managerial decisions without sitting in the boardroom. The new government should not permit this sort of covert operations.

Either allow the foreigners come with their investment and accept it or else strictly keep them at a distance. There is another backdoor entry for foreign airline companies into Indian civil aviation companies. The government of India rules strictly prohibit ownership of a foreign airline like Singapore Airlines in any Indian carrier company. But the rules do not prohibit ownership of equity of Indian carriers by foreign nationals as such. If a foreign airliner like British Airways can find its nominees abroad to own up the sharesof the Indian carrier companies, it can easily control the management of these Indian airline companies. In fact there are rumours that such an arrangement had already been entered between Speedwing and ModiLuft. These `foreigners' could as well be NRIs.

It is not important whether these rumours turn out to be true or not. But what is at stake is the credibility of government policies. If the government frames a rule or a policy and allows the policy or rule to be circumvented if not broken by foreign firms with the collusion of Indians, its credibility will be affected. The policies and rules framed by the government should be transparent and open. Only then it will inspire confidence in the minds of foreign investors and attract investment into our country.