Days after Prime Minister Manmohan Singh accused foreign-funded NGOs of acting in the interest of other countries, National Advisory Council members Aruna Roy and Deep Joshi, along with other activists besides economists, have asked the Prime Minister not to bail out the financially troubled Kingfisher Airlines. According to a Business Standard, the letter they sent to the Prime Minister said that public funds should not be used to pay for the “mismanagement” of a “profligate private enterprise”.
Recent statements from the Ministers of Civil Aviation and Finance, the activists said, seem to suggest that the government “is on the verge of succumbing to the scare tactics” of Vijay Mallya who owns the now cash-strapped Kingfisher. The government seems set to “persuade banks to provide him yet another bailout to fund a company that has so far raked up almost Rs 7,000 crore in losses, entirely funded by loans”, the letter added.
Since most of the money has been lent by nationalised and public sector banks, which are repeatedly capitalised by the government, it would “ultimately mean that this profligate private enterprise will be bailed out with public funds”, according to the missive, signed by Nikhil De, Sucheta Dalal, Jayati Ghosh, Praful Bidwai, Biraj Patnaik, Prashant Bhushan, Suman Sahai, Ashwini Sharma, EAS Sharma, Jagdeep Choker and Kapil Bajaj. “We, a group of concerned citizens, are writing to express our strong objection to any further bailout of the flamboyant billionaire,” they said, adding it “will only allow him to continue to mismanage the airline”.
The letter goes on to allege complicity of Indian banks in the bankruptcy of the Mumbai-based airline, as banks took no action though a report on the company’s poor financial condition was available since September 2011. The report by Veritas, an independent Canadian research firm, “clearly anticipated and documented the fate” of Kingfisher Airlines, they claimed.
The report, called ‘A Pie in the Sky’, also warns UB Holdings, the parent company of Kingfisher Airlines, to be “teetering on the verge of bankruptcy”. Kingfisher Airlines’ book equity has been wiped out, although audited financials pretend otherwise, it added. The “silence” of the banks, the letter by Roy and others said, “amounts to dereliction of duty, since Kingfisher Airlines' inability to pay endangers their own profits”.
The letter quotes Veritas as saying thus, “Unless the banking institutions have provisioned judiciously for the debt provided to Kingfisher Airlines — approximately Rs 4567 crore (USD 986 million) in loans to Kingfisher in addition to standby letters of credit, etc — it renders the disclosed capital position of the banks unreliable.”
Also, the letter said, it “is hard for us citizens to believe that the government could do nothing to protect taxpayers’ funds or prevent further haemorrhaging of Kingfisher Airlines over the past five months after this report”.
The letter goes on to urge the Prime Minister to provide no bailout to the airline without forcing Mallya to liquidate his own personal assets to pay for the “excesses of his airline”.
The letter said the airline boss must be forced to bring in at least Rs 4,000 crore to Kingfisher. “This is easily doable,” the letter said. “Unless the government demonstrates its willingness to initiate tough action, the people will be forced to explore other options to ensure justice and fair play.”
