The Department of Industrial Policy and Promotion (DIPP), the agency responsible for foreign investment-related policies, has asked the civil aviation ministry to give its views at the earliest on a revised proposal which seeks to allow foreign airlines to invest 24% in domestic carriers. The department had earlier suggested 49% cap for foreign airlines in response to a civil aviation ministry’s proposal permitting 25% equity participation in local carriers.
?Their (aviation ministry) view on the issue would enable us process the proposal further,? DIPP sources told FE.
Any move to relax the foreign direct investment (FDI) norms would help carriers like Kingfisher Airlines to raise fund to expand their fleet and network. The existing policy allows foreign companies to invest upto 49% in the Indian carriers. Foreign airlines are, however, barred to invest directly or indirectly in domestic airline companies.
The civil aviation ministry had in 2008 proposed to allow foreign carriers upto 25% stake in local carriers within the existing limit of 49% by foreign companies.
?Since FDI policy is generally structured along the caps of 24%, 26%, 49%, 74% and 100% depending upon the level of rights proposed to be made available to foreign investors and with a view to ensure adequate clarity about the ability of resident shareholders to pass special resolutions under the Companies Act 1956 this department has proposed that foreign airlines may be allowed entry in scheduled, non-scheduled and chartered airlines with FDI upto 24% instead of 25% under the FIPB (Foreign Investment Promotion Board) route,? DIPP has said. Most of the Indian carriers, including Jet Airways, Air India, IndiGo and SpiceJet are on expansion mode with domestic air traffic on the upswing. IndiGo last month placed an order with Airbus Industries to buy 180 aircraft worth $16 billion on the list price.
?The liberalised policy would not only ensure cash for the domestic airlines it would also bring international practices,? an analyst said.