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Narendra Modi government clears way for crucial FDI in Air India

In a major push for reform agenda, the Narendra Modi government on Wednesday cleared path for crucial divestment in Air India.

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In a major push for reform agenda, the Narendra Modi government on Wednesday cleared path for crucial divestment in Air India.

At present, foreign airlines are allowed to invest under government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent of their paid-up capital.

However, this provision was presently not applicable to Air India, thereby implying that foreign airlines could not invest in Air India. It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49 per cent under approval route in Air India subject to the conditions that: Foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49% either directly or indirectly.

Substantial ownership and effective control of Air India shall continue to be vested in Indian National.

Recently, Centre for Asia Pacific Aviation (CAPA), an aviation consultancy firm had said that deferring Air India sale could cost $3 billion to the national exchequer.

It was of the view, the the privatisation of the national carrier should happen at the earliest.

CAPA's statement came after reports about the Parliamentary Standing Committee on Transport, Tourism and Culture concluding that the government should review its decision to privatise or disinvest Air India and explore the possibility of "an alternative to disinvestment of our national carrier which is our national pride".

Air India has a total debt of about Rs 48,877 crore at the end of March 2017, of which about Rs17,360 crore were aircraft loans and Rs 31,517 crore were working capital loans.

The airline is expected to report a net loss of Rs 3,579 crore for 2017-18, as per budget estimates projected for 2017 -18 from a provisional net loss of Rs3,643 crore for 2016-17. The airline is projected to increase its operating profit to Rs531 crore (BE projected) for 2017-18 from a provisional operating profit of Rs 215 crore for 2016-17, as per latest figures tabled in Parliament.

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