This makes it the second time in as many months that the Tatas have been forced to pull out of a major venture involving prestigious foreign investors because of the delay tactics of this very ministry -- in July, the Tatas pulled out of the Rs 1,200-crore Bangalore airport project after the ministry tried to change the terms of the project and later refused to honour commitments given by them to the Tatas at the time of the original bid.

The Tatas' decision to pull out of the airline project was communicated to Civil Aviation Secretary P V Jayakrishnan in a letter written by Tata Industries' director Sujit Gupta. Gupta also sent a separate letter withdrawing the group's application with the FIPB to its chairman T R Prasad. Copies ofthe letter were also sent to all FIPB members including Finance Secretary Vijay Kelkar, Commerce Secretary P P Prabhu, and A N Ram who is the economic secretary in the Ministry of External Affairs.

While no comments could be got from either the Civil Aviation Minister Anant Kumar or the Secretary, when contacted FIPB officials said the Tatas had in fact appreciated the positive role played by them and had said the main reason for the delays lay with the Aviation Ministry.

Briefing the press shortly after today's letters were shot off, Gupta said their decision to pull out of the project was not in any way a vote of no-confidence in the government but was really a vote against the Ministry of Civil Aviation.

Today's decision was interpreted by observers as a smart one since the expert committee set up by the Aviation Ministry to examine their project after sitting on it for eight months was sure to reject their case. As a Tata spokesperson put it at today's briefing: ``The committee has been set up bythe same ministry which has been opposing the project.''

Indeed, all evidence seems to suggest that the ministry has played foul with the Tatas, with the aviation policy itself being changed, and several amendments added to it, to prevent the airline from taking off (see box). So, for example, while the earlier policy allowed foreign airline companies to have a 40 per cent stake in local carriers, this was changed when the Tatas roped in Singapore Airlines as their partner. This, despite the fact that the government allowed Jet Airways to carry on with a 40 per cent stake by foreign airlines. And, in December 1997, also allowed ModiLuft to sell 40 per cent of its equity to foreign investors -- the latter deal never worked out eventually, but for different reasons -- but never asked it to disclose who the investors would be.

Similarly, when Jet Airways was given six months to divest the stake of foreign airlines -- Kuwait Airways and Gulf Air -- it just gave a three-line letter to the ministry saying itwould comply. Nor were any questions asked about the details of the shareholders of its holding company, Tailwinds which is registered in the Isle of Mann.

The Tata proposal was, however, put off for several months with the ministry insisting on getting full details of who the investors would be -- the fact, however, is that with the proposal not even cleared, how could the Tatas get any investors in the project.

The key problem, as is evident to all including those in the government --the PMO, the Finance Ministry and the Industry Ministry have been strong supporters of the project -- is that the Tatas were checkmated by domestic vested interests, generally suspected to be competing airline companies. In fact, at one stage, even the state-owned Indian Airlines was brought into the act and put out a note saying that they would be hit badly by the proposed Tata Airline.

Most of the facts in this note, however, were incorrect -- the note, incidentally, formed the basis on which several MPs opposed theproject. The note, for example, talked of how IA's capacity utilisation (load factor, in jargon) had fallen in the last few years, when it had actually gone up. It also spoke of how there was plenty of excess capacity in the industry today, when in fact the civil aviation ministry itself had pointed out that there was a demand of 47 additional 120-seater aircraft in the next three years. Add to this the fact that, in the last two years, 17 aircraft of different airlines have gone out of use.

The Tata Airline which would involve foreign equity of Rs 278 crore was expected to generate direct employment to around 2,400 people by the fifth year of its operations, and to 10,000 people indirectly in terms of support staff at airports, baggage handlers, and so on.