Govt notifies decision on allowing FDI by foreign airlines

Moving ahead with the reforms, the government today notified the cabinet's decision to allow foreign airlines to pick up upto 49% stake in private Indian carriers.

"The government of India has reviewed the position in this regard and decided to permit foreign airlines also to invest in the capital of Indian companies operating scheduled and non-scheduled air transport services up to the limit of 49% of their paid-up capital," the notification said.

This would now pave the way for much-needed equity infusion into Indian carriers which are in dire need of funds for operations.

The Cabinet Committee on Economic Affairs, last week, had allowed foreign airlines to invest in scheduled and non-scheduled air transport services. The move is aimed at boosting the cash-strapped aviation sector.

The investments would be made under the government approval route and the parties need to comply with regulations of Securities and Exchange Board of India, like issue of Capital and Discloser Requirement and Substantial Acquisition of Shares and Takeovers Regulations, as well as other applicable rules and regulations, the notification said.

Earlier, no foreign airlines were allowed to invest in Indian carriers directly or indirectly.

Indian private airlines have been demanding permission to foreign airlines to invest as they have been facing severe cash crunch on account of high taxes on aviation turbine fuel, rising airport fees, costlier loans, poor infrastructure and competition.

Except IndiGo, all airlines have posted losses in the financial year ending on March 31.

Vijay Mallya-promoted Kingfisher has been burdened with a debt of over Rs7,000 crore and has been in the forefront of pushing for permission to allow foreign airlines to invest in domestic carriers.

In the last 12 years, between January 2000 and April 2012, the total FDI inflow into the air transport sector was just $ 434.75 million, which was 0.25% of the total FDI inflows into the country.

As per the notification, scheduled operator's permit would be given to a company which is registered and has its principal place of business with India.

The chairman and at least two-third of the directors would be Indian citizens and the substantial ownership and effective control would be with them.

If a company hires foreign nationals, as a result of such investment, he would have to get security clearance before his deployment. Also clearance would be required for the equipment, which are imported in India, by officials of Ministry of Civil Aviation, the notification said.