Kingfisher situation an example of India’s free market/welfare state identity crisis
Bailout. A term which till recently was alien to India.
It was something the West did, to save their big financial institutions which had grown too big too fast and had squandered their cash positions while betting on complex instruments that even they did not fully understand.
India, and largely Asia, was rather different. We were the growth engines of the world. The Asian giants would prevent the global meltdown from getting worse and would reverse it eventually, or so went the perception.
Three years on and as the Greek crisis looms, the major Asian economies and their counterparts from around the world are still pondering on how to prevent the problems in Europe from spreading worldwide.
India, meanwhile, is facing economic and policy conundrums of its own.
From record prices of fuel, food and other essential commodities and multiple rate raises by the central bank, to a growth slowdown and a government struggling to meet its deficit targets.
Bailouts may now become a reality for Asia’s third largest economy in the post-Lehman world. The most prominent example which comes to mind is of course that of the troubled national carrier, Air India.
from DealZone:
Reliance aims big with $12 bln bid for LyondellBasell
Ranked by Forbes as India's richest man with a net worth of $32 billion, Mukesh Ambani is no stranger to taking risks.
The move by conglomerate Reliance Industries, controlled by Ambani, to bid for bankrupt LyondellBasell is a calculated one. Markets seem to think this is a bargain and investors pushed up Reliance's stock nearly 4 percent on Monday.
If the deal, which sources say may be worth $12 billion, goes through, it would catapult Reliance into the ranks of top petrochemical makers such as Saudi Arabia's SABIC, Germany's BASF and Dow Chemical Co.
The bid comes at a time when asset prices have fallen globally in the wake of the economic crisis but there are still some lingering doubts over whether the worst is over for the global economy.
Reliance hasn't shied away from making mega investments during downturns.
Last December, Reliance commissioned a 580,000 barrels per day refinery next to its existing 660,00 bpd plant in the western Indian state of Gujarat, creating the world's biggest oil refining complex just as global oil demand began to collapse.
Reliance has a cash pile of $4 billion and $8 billion in treasury stock that can be sold, so funding is unlikely to be an issue for the company, Macquarie said in a research note ahead of the bid. Bank of America Merrill Lynch is among the advisers for Reliance, sources said.
Uneasy numbers stacked against Air India
State-run Air India, which enjoyed a monopoly in the country till the deregulation of the aviation sector in 1991, is besieged by ballooning debt and a litany of woes, pushing it to the brink of collapse.
Unless, of course, the central government steps in to bail out the national flag carrier.
Air India is now seeking a 39.81 billion rupees package from the state, though the airline has been asked to come out with a plan of action to make its existence viable.
The money may come as federal aid in the form of equity and loan.
But some say the airline needs a credible action plan to rescue it.
The civil aviation ministry says the 31,000 workforce should be trimmed to keep it viable. Estimates put the average number of employees per aircraft at nearly 1:230, while as per international standards, an airline needs 1:100 -150 employees.
Others question whether the ministry, which presides over the National Aviation Company Ltd created to run the merged Indian and Air India, can absolve itself from the faultlines posed by the bloated workforce.
Like what they says in west first create a monster and than kill it.
Our Goverment in the name of privatisation and opening up of doors to foreign and private player killer our demon. And create monster situations. I am quite surpirse to hear lots of critical comments on babu and beauracts. I do agree they are all much more responsible for this dibacle. But is the disinvestment is the only solution. Are we now at that point where No national Pride Means to us. National Carrier not only carry national flag but also a symbol of the respective conutry in outlan.
Look at singapore Airlines Emirates, They all run effectivly with gud service and margin of profit with high end counsumer to mid segment consumer too. And more over they are carry the pride of their respectives states.
But how and why all it happens. A interesting article on rediff news published some day back . Give an full details on the revival and resons for the failure of this mehmoth.
Any way we can still take this out from trouble by doing things in positive way and wiling to do. Think of the staffs of this institution. There moral must be at deep earth low . Willing to performe must have died.
We need a revival financially and morally both. A road Map which can not only create revenue but also pride to run this.
A Govt who act like a pimp to foreign and pvt players looks in so hurry that wanna to sell this country assest in fast. Are they nuts who will simply allow thier AIRspace in other hands. Go to any major international AiRport they have dedicated corrider for thier state run AIRLINES and here our company behaved like a step brother or even worse. why Indigo can have 87 points. can’t INDIAN not achive this. They can but need to change with time and keep the essence of Indian in it. I wish We must understand one point at this time. -
If we not preserve our state resources now than this country will be run by DHUGS and OUTLANDER and policis taken in the interest of their monetary benefit. Dont Make this happen other wise next time we will not have Gandhi or Azad to fight for it.
Thought for food- “When we got a cut in our hand, we not cutout entire hand but try to cure the cut and find out the reason to avoid further cut.”
Kingfisher Airlines owned by the Liquor Baron Vijay Mallya is facing crisis after crisis,bills over due to the Oil Companies,cancellation of flights,huge out standings to its debtors both big and small, pilots leaving because of non-payment of salaries among other things.
There was a suggestion from the Civil Aviation Minister that he will talk to banks to lend money to Mallya to run the Airline.
The Central government is reported to be contemplating a bail out Plan.
Now Mallya comes on TV Live blaming every body for the state of his company,though graciously admitting(!?) that he has some problems(!),calling for reduction in Aviation fuel prices,high taxes on Fuel, non lucrative routes and Competition.
A private entrepreneur enters a business knowing all the risks.He makes profits and he does not share it with the common man or banks.
Bottom line is you have not run your business properly and that you owe money to banks , your Creditors and the Oil companies.
In short you are without money to run your business.
Does any one go to a bank and say that he has suffered a loss and would the Bank extend more money?
Would the banks agree to it?
They will attach your property and leave you with your loin cloth.
Why the different treatment to Mallya who owns one of the largest Liquor companies in India,owns race horses,owns Cricket team and has a l penchant for High and Vulgar Living?
Let him pay up or close down.
No more talk of restructuring ,job loss non sense.
India seems bent on Bail out mode in the foot steps US.
If poor people are helped by the Government it is ridiculed as ‘Welfare State‘
But bailing out criminally negligent businessmen,it is economic growth?