Voice from the Rooftop

Blog of Vincent Augustine D'Souza

Let Kingfisher Go Bankrupt

It is a crime on the part of State Bank of India to give a loan of 1,650 crore rupees to Kingfisher. Some of it will be in the form of bank guarantees. It is ridiculous for RBI Deputy Governor K. C. Chakrabarty to say this was a professional decision and may help Kingfisher pay back all its loans. This is a very unprofessional decision. What will RBI do if SBI does not get its money? Print notes and give it to SBI?

Kingfisher had defaulted on its loan from SBI and many other banks. Loan from SBI was converted into shares at Rs.64.48 per share when the market value was Rs.48 per share and now the value is less than Rs.20 per share. It resulted in loss to SBI and consequently Moody’s downgraded SBI and put other lenders to Kingfisher on watch list. The government of India had to give money to SBI to save it. Public sector banks are the property of the people of India. They are not the property of ministers. SBI’s decision defies business sense. Who ordered SBI to take the decision? Is it Finance Minister Pranab Mukherjee or someone else? Is it an oral or a written instruction? SBI should not hide behind client confidentiality which is meant to protect defaulters. There should be a law that makes it obligatory for banks to display the list of borrowers, the amount borrowed, amount paid, due dates and defaults on their web sites. Those banks do not have web sites should have web sites.

Kingfisher was in trouble in November 2011. That time many flights were cancelled. Manmohan Singh found ways to get Kingfisher out of trouble. After three months flights are cancelled again. Kingfisher should have shutdown when it was unable to pay loans to banks. Vijay Mallya will keep profits he makes from liquor business and invest in IPL and Formula 1 and the losses he makes on Kingfisher are to the people of India. Vijay Mallya said “Closing down is not an option. It will not happen. Government does not want it to happen. It is not in national interest.” Who from the government said they don’t want Kingfisher to shut down? Kingfisher is a non-performing liability and saving it is not in national interest.

When flights are cancelled passengers should be refunded whether they paid in cash or through credit card or travel agent. It is wrong to make passengers who paid through credit card or travel agent wait for three weeks by routing refunds through agents. Passengers should not be asked to revalidate tickets for future use.

Kingfisher being one word the abbreviation for Kingfisher Airlines should be KA and not KFA as many TV channels do.

All types of excuses are given to bail out Kingfisher. One is that it is done for the benefit of passengers. If Kingfisher is shut down passengers will use other airlines. Another excuse is that it is not about an individual but about the company. Veerappa Moily said “I am not in favour of closing down any company. We saved Satyam. But it was not about an individual, but about the company.” Satyam should not have been saved and B. Ramalinga Raju is still free. Instead of being in jail he was in ICUs and ran his business from there. Third excuse is that aviation industry is facing crisis and private airlines are bleeding severely. Indigo is making profit. Other airlines should find their ways to make profit or shut down.

Kingfisher’s licence should have been cancelled by this time. DGCA Bharat Bhushan said “Such an action will only precipitate matters. They are among the largest airlines, and we cannot ask them to shut down. I will have to consult the ministry before initiating any such action.” It means small airlines will be punished for violating rules and causing hardships to passengers but large airlines will not be punished whatever they may do. Someone said DGCA safety surveillance is a joke. They just fill forms. Bharat Bhushan may consult the ministry but as DGCA he is responsible for his actions.

A person who had deducted tax at source but not deposited with Income Tax Department would have been in jail. In Kingfisher’s case 170 or 200 crore rupees were deducted as tax but not deposited and IT Dept freezes bank accounts and Vijay Mallya is free. In December 2011 Kingfisher accounts were frozen and after some days defreezed.

Kingfisher has defaulted on loans, has not paid taxes deducted at source, owes money to oil companies and salaries to employees. Let it go bankrupt.

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