The civil aviation ministry has finally agreed to equity participation by foreign airlines in domestic carriers. In a letter to the Department of Industrial Policy and Promotion (DIPP), the ministry has recommended easing of FDI rules to allow foreign airlines to invest up to 24% in local carriers within the existing cap of 49% for foreign investors.
?We have communicated our views to DIPP on its proposal to allow foreign airlines to invest in domestic carriers. Our recommendation is for 24% within the limit of 49% permissible for foreign investors,” an aviation ministry official told FE, adding that Indian carriers needed foreign capital to survive.
The aviation ministry has decided to relax the FDI rules for foreign carriers in spite of strong opposition from private carriers like Jet Airways and SpiceJet. Among seven scheduled domestic airlines, only Kingfisher Airlines has so far batted for opening up the sector for foreign airlines.
“Earlier, GoAir actively lobbied for relaxing the FDI rules for foreign carriers, but, now, as its financial health has improved, it is not speaking for the policy shift,” a top industry source said.
Meanwhile, a top DIPP official told FE that the department is not happy with the aviation ministry’s proposal of 24%. “We would like the sector to be opened up with at least 26%, as below this, it does not sound suitable for investors,” he said. He also said commerce and industry minister Anand Sharma would soon take up the issue with aviation minister Vyalar Ravi, to fast-track the proposal.
