Vijay Mallya’s Business Model Could Be At Fault: Arun Jaitley

Washington: Questioning the “business model” of long-grounded Kingfisher Airlines for embattled tycoon Vijay Mallya’s mounting woes, Finance Minister Arun Jaitley has said the airline sector as such is doing well in India with many carriers making good profits.

Mr Mallya, the owner of Kingfisher Airlines and many other companies that owe over Rs 9,000 crore of dues to lenders, is currently in London, defying summons by the Enforcement Directorate (ED).

“I am not giving a final opinion on it. It could be attributed to the business model of a particular company,” Mr Jaitley on Friday said here in response to a question on Mr Mallya, on which he refused to be directly dragged into.

“As far as the recoveries are concerned, in this (Mallya) case, banks are taking all possible steps. And whether there have been violations of some penal provisions, the investigating agencies are looking at it,” he said.

A non-bailable warrant has been issued against Mr Mallya after he refused to return to India to appear before the Enforcement Directorate on three different occasions on investigations related to a money laundering case against him.

Mr Jaitley’s remarks came on a day when the External Affairs Ministry suspended Mr Mallya’s diplomatic passport for four weeks and threatened to revoke it if he fails to respond within a week on why his passport should not be impounded.

“I do not think it (Mallya’s case) had anything to do with the government because a lot of his cases were also locked up in courts. When he was in India, I understand from the banking sector that almost every recovery, every step, was challenged in court.”

“So he used the legal process till the date of his departure and then he had to abandon that,” the minister said.

A member of Parliament, under the existing law, could lose his membership if one becomes an “adjudged insolvent”, for which the bankruptcy law is necessary, he said.

“Generally, if you are not paying, that is different from the legal language in the constitution. There has to be a system under which you are adjudicated and judged as a declared insolvent and that only happens if you have an insolvency law in place. That’s what the parliamentary committee is looking at not in his context but independent of that,” he said, hoping that this case may help early passage of the law.

Responding to a question, Mr Jaitley said the airlines sector in India is not suffering that much, unlike several other sectors like steel and power.

“If you look at other airline companies in India, most of them have turned around and are making (profits). Jet is now making profit. Indigo has made huge profits throughout. Spice Jet is making profits. Go Air is making profits,” Mr Jaitley said.

Mr Jaitley said his own understanding of the NPA (non-performing asset) situation is that most of it is related to business failure in certain specific sectors of the industry.

“If you analyse the quantum of NPAs, they represent about five or six sectors – steel, power, somewhat in textiles, highways, infrastructure, there are a few of them in sugar. In addition to these there are individual companies that have done badly,” he said.

Some loans might have been given without adequate due diligence principles, he acknowledged.

“Airlines problem is not sectoral, for the simple reason that most of the other airlines lasted the challenging period, turned around and are making profits. In steel, across the board sector was suffering, highways is a sector where everybody was suffering.”

“These are all sectoral reasons, sectors where you have to address the sector, where the sector would revive and the bad loans become performing loans,” he said.

Mr Jaitley said banks and other investigating agencies would act independently and take their own decision.

“The banks have to take a prudent decision based on their banking. The government did not ask the banks to sanction the loan. The banks (even if it is a government-owned) would have to take a decision” based on their commercial considerations, he said in response to a question.

The Finance Minister is currently on a week-long tour of the US primarily to attend the annual the Spring meeting of the International Monetary Fund and the World Bank.