After opening the multi-brand retail sector to foreign direct investment, the government is set to push through the next big reform agenda of allowing foreign airlines to pick up 26% stake in domestic carriers.
The twin aim is to help troubled airlines get access to overseas funds and clear the charge of policy paralysis on the government.
A top Department of Industrial Policy and Promotion (DIPP) official told FE that after getting views on the proposal from the stakeholders by the end of the week, the department will immediately send the Cabinet note for approval. ?The approval could come anytime in December,? the official said.
The proposal on allowing overseas carriers to pick up stake in domestic airlinbes has been subject of debate or past several years. The issue also divided ministries with DIPP favouring a 26% stake for overseas carriers while aviation ministry supporting only upto 24% stake.
Sources say that a consensus has been built now between the two nodal ministries and the proposal has also got support of the finance ministry.
The official also added that the policy for allowing FDI in aviation will not see any specifications or conditions along it. He said, ” we have or we will not propose any conditions with it since if we want to open the sector it has to be with no conditions.”
Earlier talking to FE, commerce and industry minister Anand Sharma said: “A proposal has come from the civil aviation ministry and it is receiving our active consideration.”
After which DIPP had circulated a draft cabinet note for inter-ministerial views.
Last month, the civil aviation ministry had written to the DIPP agreeing to equity participation by foreign airlines in domestic carriers, proposing to allow foreign airlines to invest up to 24% in local carriers within the existing cap of 49% for foreign investors.
However, DIPP was not happy with the aviation ministry’s proposal of 24% cap and had suggested a minimum of 26% highlighting that a sectoral cap below 26% would not suffice to attract investors (foreign airlines).
The FDI proposal has still not full support of the domestic aviation sector.
A few airlines feel that the move could result in giving lucrative domestic sector to foreign airlines.
Despite debt problem, a few domestic airlines feel that the sector is still growing at robust pace in India and proper pricing of fares could help it overcome present problems.
Foreign airlines, on the other hand are looking for business opportunities in emerging markers as their growth in country of origin has stagnated and ongoing slowdown is not helping their cause.
