The department of industrial policy and promotion (DIPP), the principal policy making body on FDI, has stated in no uncertain terms that its regulations for the aviation sector are crystal clear and needed no further clarification with particular reference to the AirAsia-Tata Group deal. The department, at a meeting to clear the deal, has said that the existing policy allows foreign carriers to set up new joint ventures with Indian partners and there is no ambiguity in the regulations.
The statement puts to rest any doubt regarding the hurdles that the proposed airline venture of Malaysian carrier AirAsia along with the Tata Group, might have faced on the FDI policy front. The venture, which was cleared by the Foreign Investment Promotion Board (FIPB) would now just require a no-objection certificate from the civil aviation ministry and a scheduled operator?s permit from the directorate general of civil aviation.
The civil aviation ministry had raised concerns that Press Note 6 of 2012, which relates to FDI in airlines, was ambiguous and interpreted the policy to be applicable only for existing airlines and not for entities proposing a greenfield venture in the sector. In fact, aviation minister Ajit Singh have gone on record to say that while the ministry agreed to the the proposal in-principle, it may face procedural issues in wake of lack of clarity in the FDI policy.
?The applicant should first set up the company, obtain licence from ministry of civil aviation and then divest to a foreign collaborator in order to follow the policy item,? the civil aviation ministry representative had stated at the FIPB meeting on March 6, when AirAsia?s proposal was cleared. ?The Cabinet note which elaborated the background for the policy amendment had clearly delineated that the amendment was aimed at infusing capital into the existing cash-starved aviation companies,? the ministry argued at the meeting.
But the representative from the DIPP said that the policy needed no clarification and also pointed out that the ?spirit of the FDI policy was to get fresh investment into the country?. The FDI policy also specifically makes a distinction between greenfield and brownfield projects in areas where such categorisation is made by DIPP. But in the case of aviation, no such distinction has been made, meaning that such investments could in a new or existing company.
?AirAsia-Tata airline joint venture is facing procedural issues,? said Singh after an industry event in New Delhi on March 27. He, however, did not elaborate on what the procedural issues were. ?We will support the AirAsia-Tata Sons joint venture.?
The tripartite JV between AirAsia, Tata Sons and Amit Bhatia of Telestra Tradeplace have already incorporated the Indian company, AirAsia (India).
Earlier, AirAsia chief executive Tony Fernandes said that he plans to start with three to four planes by the fourth quarter of the current fiscal with its base in Chennai. However, Indian laws require a company to have at least five planes before it is given a scheduled operators permit.
?They have not yet approached us for a no-objection certificate,? a senior civil aviation ministry official said on condition of anonymity. ?The investment has been cleared but before giving a no-objection certificate we will have to verify all aspects, including their staff, the number of planes and health of the industry, which is the normal procedure.?
The official declined to comment whether the ministry?s doubts about the FDI policy will hurt AirAsia?s chances of getting a no-objection certificate.
AirAsia?s investment is the first to be cleared by the FIPB since the government allowed foreign carriers to invest in India. Abu Dhabi-based Etihad Airways continues to be in talks with Naresh Goyal-owned Jet Airways to pick up a stake in the Indian airline.