• 0

  • Likes

The notorious dethroning of the king of the good times has been doing the rounds for quite a while now. The trade off, may it be the employees or the creditors on the receiving end seem inevitable to drag Kingfisher to the ground, what is left of it anyway. As The UK has disagreed to deport Mallya, and with the government likely to use the extradition route, we look at some problems that would help to shed light on the entire situation.

The first mistake that Mallya made was the acquisition of Air Deccan at a higher bid after the deal between the latter and Anil Ambani had crumbled. Even though it did give a good market share in the airline industry, and a license to fly international, Kingfisher would have to deal with the loses that Deccan incurred as well. The underestimation of the international route business and non consolidation of the domestic ones also caused considerable loses to the company. The former business partner of Vijay Mallya also claimed that the business strategy failed and Mallya acted more as an absentee landlord. Even though Mallya did all that he could, the loses kept on mounting and the business model collapsed. The scrapping of the low cost accomplice Kingfisher red as a cost efficient measure also proved to be costly as the price conscious Indian market and consumer did not digest that very well.

Although willful defaulter Mallya does owe 9000cr to the banks, one would rather be surprised to know that about 5000 wilful defaulters owe 50,000cr to banks. This tells us the sorry picture of the NPAs in the Indian economy. Quite astonishingly, or maybe not, most of these (includes wilful defaulters of 25 lakh and above) are with the nationalised banks and the State Bank and its subsidiaries. According to Sanat Dutta, a lawyer for nationalised banks in DRTs has asserted that parliamentarians pressurize banks to give cheap loans to big corporates thereby making the politician-beaurocratic-corporate nexus very strong. The SARFAESI act of 2002 also needs to be amended because criminal proceedings cannot be pursued against wilful defaulters as the act is civil in nature.

So bottomline is, Vijay Mallya’s failure to propel Kingfisher into the epitome of airline industry failed miserably. Not only did he become a wilful defaulter, he also had to step down as the chairman of the UB group. So you could say that he is not a scapegoat. The company On the other hand, has blamed the high cost of aviation fuel and  the requirement to service non profitable routes as their downfall. One also has to assess the loan giving capacity of each bank and address the government-corporate nexus that is disastrous for the economy. So a stringent watch over the viability of the projects, the amendment of the SARFAESI act would go along way in keeping defaulters on a tight leash.

Share this article

Written By Abhijeet Deshmukh

B.A Economics, aspiring civil servant, Young Bhartiya Core Team Member.

Leave A Reply