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Foreign airlines allowed 49% stake in Indian carriers; package for Air India

In a move to bail out the Airline companies, government on Tuesday proposed 49% FDI in aviation sector.

DNA Web Team

Updated : Jan 17, 2012, 07:32 PM IST

Accepting a major demand of the cash-strapped aviation industry, the government on Tuesday said it would soon launch the process to allow foreign airlines 49% stake in Indian carriers.

It was decided after a meeting between Finance Minister Pranab Mukherjee and Civil Aviation Minister Ajit Singh to immediately release Rs150 crore for payment of portion of pending salaries and allowances of Air India employees, including pilots.

Replying to questions after the 75-minute meeting, Singh said "the question was to allow foreign airlines to participate in FDI. I discussed it with the finance minister and he has agreed. We will bring out a note for the Cabinet now."

Allowing foreign airlines to pick up stake in Indian carriers would mark a major policy shift. Earlier foreign airlines were not allowed to invest in Indian airlines though foreign direct investment was allowed.

Asked about the FDI cap on foreign airlines, he said "49% FDI is already there. The question was to allow (international) airlines to participate in the FDI. The CoS (Committee of Secretaries) has also recommended that FDI limit should be raised to 49%."

Singh said FDI was one of the factors which would help the industry to survive the current financial crisis. "We all know that the aviation industry is under a lot of stress."

On Air India, Singh said Rs 150 crore would be "released soon" to the ailing national carrier.

Noting that Air India pilots had recently gone on an agitation, he said "the government has decided to release sufficient funds to pay at least some part of their wages and PLI (productivity-linked incentives)."

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