Email
Print
ShareNew Delhi: A long pending proposal of the civil aviation ministry, seeking 25% equity investment by foreign airlines in Indian carriers, is scheduled to come up before a high-powered committee on November 17.
The panel is headed by cabinet secretary, K M Chandrashekhar, and comprises secretaries from the ministries of civil aviation, finance, law, industry and home.
While civil aviation minister Praful Patel favours a cap of 25% on foreign carriers' equity buying, the Department of Industrial Policy & Promotion is believed to be seeking a much higher 49% cap.
This proposal was first mooted two years back when, along with myriad suggestions on reducing tax burden on ATF and a whole range of other aviation activities, the ministry had quietly inserted this viewpoint in a presentation to be made before the cabinet secretary.
At that time, the ministry had also suggested that the foreign direct investment (FDI) limit of 49% (which is at present allowed for non-airline foreign companies) be relaxed too. It isn't clear whether the meeting of the committee of secretaries (CoS) this time would also consider relaxing the overall 49% FDI limit.
Interestingly, the push for a discussion on FDI in airlines comes just when Jet Airways' proposal to raise $400 million by issuing fresh shares to domestic and foreign institutional investors would breach the 49% FDI cap.
The CoS meeting is happening after Kingfisher Airlines' Vijay Mallya said earlier that foreign carriers were approaching him for equity investments. Some other Indian carriers are also believed to be pushing for such a permission citing the precarious financial health of Indian carriers and how such a move would bring in much-needed cash to this cash-strapped industry.
However, at least one large private carrier is believed to be opposed to any such proposal.
But isn't a decision on foreign carriers being allowed to invest in Indian carriers a part of the much delayed aviation policy, which is hanging fire because of the inability of the high powered group of ministers (constituted for the purpose) to meet?
This policy would have also taken a call on reducing the mandatory five year domestic flying restriction which is currently in force for domestic carriers.
Both these suggestions would help domestic carriers, which have very low capital bases and are fraught with an urgent need to improve their financial situation.
Pointing out that, even for Air India, the capital base is a mere Rs 150 crore, ministry officials had earlier said "the issue is not about increasing FDI but allowing foreign airlines to come and invest in Indian carriers so that the latter get access to funds".
Present norms allow only 49% foreign investment and that too by non-air transport companies. Foreign airlines are barred from investing in any form in Indian carriers.
