In a major fillip to the high-growth aviation sector, the government on Wednesday approved an almost complete overhaul of the foreign direct investment (FDI) policy for the sector.
The move will help the sector attract around $50-$70-billion investments over the next few years, which is civil aviation minister Praful Patel?s one of the goals.?FDI percentage will be 26% and the investment component of FIIs at 23%,? information and broadcasting minister PR Dasmunsi said announcing the government?s decision.
The government has capped the FDI in air transport services to 49% on the automatic route and reclassified it as domestic scheduled passenger airline sector. This sector consists of all the domestic airlines that publish fares and transport passengers.
The FDI in non-scheduled airlines, chartered airlines and cargo airlines, has been capped at 74% on the automatic route as long as no foreign airlines are participants. ?This is fantastic for the industry and it will definitely raise the standards,? Manav Singh, MD of domestic chartered airline company Club One Air said. He pegs the industry size at around Rs 350 crore and growing at 30 to 40% annually.
The cargo industry is also set for a boost with most existing airlines like Spicejet and the national carrier Air India getting heavily into cargo. The ministry estimates that India will carry around 4 million tonne cargo by 2010. FDI in ground-handling services has been hiked to 74% on the automatic route, subject to sectoral regulations and security clearance. This will lead to many more players in the ground-handling arena, leading to lower costs for the airlines and therefore result in better margins for the loss making aviation industry.
The FDI norms for scheduled and non-scheduled air services, cargo and ground handling are allows non-resident Indians (NRI) 100% investment. The norm that all no direct or indirect participation by foreign airlines occurs has remained as the ministry still believes that domestic airlines need to become stronger before being exposed to foreign carriers, a ministry official said.
Other on Agenda
* 27 RRBs spread across 15 states by to be revamped by infusing fresh capital amounting to about Rs 900 crore. The re-capitalisation funds will be released to the RRBs along with the contribution of respective state governments and sponsor banks.
* 50% industrial dearness allowance to be merged with the basic pay of employees of profit-making central PSEs, raising their allowances and retirement benefits. The proposal for the merger will apply to CPSE functionaries at board level, below board level executives and non-unionised supervisors with effect from Jan 1, 2007.
* CPWD got the go ahead from the government to participate in the tendering process for the combined projects of construction of Afghanistan?s Parliament building and Indian Chancery in Kabul.
* Approval to central scheme, entailing an expenditure of Rs 1,868.50 crore, to provide pre-matric scholarship to 25 lakh students from minority communities for pursuing education in state-run and private institutions.