With the proposal to open up multi-brand retailing to foreign direct investment (FDI) apparently put on the back burner, the government is taking cautious steps to form a consensus on its plan to allow foreign airlines to pick up stake in domestic carriers.
According to sources, not just the Department of Industrial Policy and Promotion (DIPP), which proposed the easing of FDI policy for aviation sector, but also the ministry of home affairs as well as the Planning Commission, that had hailed the department?s draft Cabinet proposal, have turned wary.
The finance ministry is yet to put on record its views on the matter, although, as FE had reported earlier, the ministry was veering around the view that the DIPP proposal could be supported.
The DIPP had proposed to allow foreign airlines to pick up 26% equity in the domestic carriers considering the cash crunch faced by the industry.
Meanwhile, on being asked whether the proposal will also be put in deep freeze, since FDI in retail is facing tough opposition, DIPP sources said that ?the department is very clear in its approach and once it gets views of all the relevant departments and ministries formally, it will formulate the final draft and send it to the Cabinet. It is for the Cabinet to take a call on whether, how and when it wants to approve the proposal.?
Currently, the government allows foreign investment of up to 49% in the domestic airlines, but the foreign carriers cannot pick up equity in the domestic carriers.
DIPP had proposed 26% FDI cap for foreign airlines as it felt that below that there won?t be actual investor interest. However, the nodal civil aviation ministry had suggested a 24% cap.
Minister of state for commerce and industry Jyotiraditya Scindia recently told FE that ?since the nodal ministry is the civil aviation ministry, we only play a facilitating role. It is our recommendation to look at a 26% FDI cap for overseas airlines in domestic carriers. But as we have done in retail, we need to build a consensus and, therefore, talks are on with the aviation ministry and we are hopeful of a consensus soon.?
He added ?the beauty of democracy is that some of the decisions may take time. But once consensus is evolved and decisions are taken, then there is no looking back.?
