The current government policy permits 40 per cent foreign equity and up to 100 per cent by non-resident Indians (NRIs) and overseas corporate bodies (OCB) but prohibits foreign airlines from holding any stake in domestic airlines.

CII submitted its proposal to the Union civil aviation minister Sharad Yadav on Tuesday proposing that allowing foreign investments in the airlines industry will help the cause of the domestic industry to meet its financial needs and upgrade technology and expertise.According to CII, foreign airlines are allowed to hold equity in domestic airlines in several countries.

For instance, British Airways holds 49.9 per cent in TAT, France, 49 per cent in Deutsche BA, 25 per cent in Quantas and 22 per cent in US Air, while KLM holds 26 per cent in Kenyan Air, said a top CII official.

CII has also sought the infrastructure status for the civil aviation sector which would make access to finance from banks and financial institutions more easy for the domestic players.

CII suggested that certain competent private scheduled airlines should be encouraged to serve the immediate neighbouring countries on a bilateral basis. This is required as there are many international routes where Air India does not have any direct flight.

Further, Air India is withdrawing from some of the routes, whereas foreign airlines are increasing their flights to India, said the official.

CII has sought changes in the routes dispersal guidelines which make category II and III routes to remote areas financially unviable for domestic airlines. CII has suggested that instead of passing the burden of running airlines on these routes, the state Government should be asked to provide subsidy.

Alternatively, commercial routes should be auctioned by which the Government can generate revenue which can be utilised for providing subsidy to airlines which will operate on the Category II and III routes.

CII said there is a dire need for separating the regulatory, policy development and operation functions.

The director general of civil aviation (DGCA) which conducts regulatory functions of civil aviation also requires reconstitution.

The Confederation of Indian Industry has also asked for spipnning off certain airports into autonomous and independent entities and be transferred to state governments for further development and maintenance.

The Airports Authority of India (AAI) should only be responsible for safety, said CII.

In order to make air travel more accessible, the high rate of duties should be done away with rationalised. The Chamber has called for abolishing the 15 per cent inland air travel tax (IATT) and the air turbine fuel prices should be rationalised, said CII.