Cabinet approves amended FDI policy on civil aviation, allows NRIs to buy 100% stake in Air India

The Union Cabinet on Wednesday approved an amended Foreign Direct Investment (FDI) policy on civil aviation, permitting non-resident Indian nationals to own 100% stakes of Air India.

This comes amid the ongoing process of strategic disinvestment of Air India. The central government has given ‘in-principle’ approval for strategic disinvestment of the public carrier and has invited bids from interested parties. The government has set March 17 as the deadline for submitting Expression of Interest.

In a meeting chaired by Prime Minister Narendra Modi, the Cabinet approved to amend the extant FDI Policy to permit foreign investment in Air India by NRIs, who are Indian Nationals, up to to 100% under the automatic route, a government statement said. 

"As per the present FDI Policy, 100% FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic up to 49% and Government route beyond 49%). However, for NRIs 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline. Further, FDI is subject to the condition that Substantial Ownership & Effective Control (SOEC) shall be vested in Indian Nationals as per aircraft rules, 1937," the government said. 

The amendment in FDI policy will permit foreign investment in Air India at par with other scheduled airline operators i.e. upto 100% in Air India by those NRIs who are Indian nationals.  

The proposed changes in FDI Policy will enable foreign investment by NRIs into Air India up to 100% under the automatic route.

The amendment to the FDI Policy is meant to liberalise and simplify the FDI policy to provide ease of doing business in the country, leading to largest FDI inflows and thereby contributing to the growth of investment, income and employment.

This is the government's second attempt to sell its stake in the national carrier, which has a debt of nearly Rs 58,351 crore (as on March 31, 2019). In the first attempt in 2018, during the first tenure of the Narendra Modi government, about 76% stake was offered. But the attempt failed as no bidder turned up for investing in Air India.

According to the new preliminary bid document issued in January, a debt of Rs 23,286.5 crore would remain with Air India and Air India Express at the time of closing of the disinvestment. The remaining debt would be allocated to Air India Assets Holding Ltd (AIAHL) which will not be a part of the proposed transaction.