Open sky policy
With reference to the news report “Vistara, GoAir cleared for take-off” (FE, June 16), the new civil aviation policy envisions opening the doors for providing better regional connectivity within the country together with enabling the new airlines to fly abroad by amending the controversial 5/20 rule in favour of new 0/20.
This could also be seen as a victory for the Tata Group over the Federation of Indian Airlines who have been opposing the government proposal to amend 5/20 rule. However, if one goes by the immediate reactions of the CEOs of both Vistara Airlines and Air Asia India, (both having the Tata Group as their co-partner) there are enough reasons to believe that a fertile ground for scrapping of even the revised 0/20 rule is being prepared.
As regards, the issue of providing regional connectivity, the govt has willingly offered a bounty of tax sops and instituted a fare cap of R2,500 for one-hour flights with its plans to revive unused airstrips and develop no-frills airports.
The government also proposes to provide viability gap funding (to be shared between the ministry of civil aviation and the state governments) through a small levy per departure on domestic routes, other than Category II and IIA routes, regional connectivity scheme (RCS) routes and small aircraft, at a rate decided by the ministry from time to time.
While the policy’s thrust may be to encourage regional connectivity and to boost maintenance-repair-overhaul (MRO) business and aerospace manufacturing industry, the implementation may not be as easy as it appears to be. One of its main irritants could possibly be the proposed ‘capping’ of air fares to R2,500 for one-hour flights. Mind you, all our wishes are seldom granted.
Urge to merge
With reference to the report “Cabinet nod for SBI merger with 5 associates” (FE, 16 June). SBI bank merger news is making headlines in pink papers.
Even the street has saluted the merger move with huge gains in market capitalisation for both SBI and its associates. But if we were to read between the lines, SBI top management’s claims seem to be unrealistic.
There would be no net increase in terms of the network or its reach but only a substitution effect.
Also, the claim that efficiencies would be created from rationalisation of branches may not hold, as when the bank attempts to rationalise branches, there would be stiff opposition from the staff union.
Merging associates branches with SBI would imply transfer of associate banks staff, who did not want a merger in the first place. As for pooling of skilled resource base, SBI staff always would always keep associates in the background.
Moreover, SBI’s top management would spend its valuable time during FY17 in integrating the merger. Thus bad assets management, improving the proportion of current and savings accounts in the overall deposit base and improving net interest margin would all take a back seat during FY17.
The concept of “big bank” has been borrowed from western countries. Relatively smaller banks in India have been doing much better in terms of returns to shareholders and customer service.
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