With the objective of providing major impetus to employment and job creation in India, Modi government today further eased norms for 100% FDI in aviation. The decision was taken at a high-level meeting chaired by Prime Minister Narendra Modi today.
The aviation sector seems to be very happy with this news.
Hailing it as wonderful news Amber Dubey of KPMG says, “After the path breaking National Civil Aviation Policy (NCAP 2016), this comes like an unexpected icing on the cake. Great day for Indian aviation!”
He further adds, “The government plans to go for a massive improvement in India’s global and domestic connectivity, affordability and ease of doing business. The opening of FDI will help bring in much needed cash, aircraft fleet and best practices. We may see its positive impact over the next 6-12 months.”
Dubey is of the opinion that, “The likely increase in competition will bring down prices and enhance air penetration in India – both international and domestic.
Indian carriers can now look for enhanced valuations in case they wish to raise funds or go for partial or complete divestment.”
Agrees Chandrajit Banerjee, Director General, CII, “Liberalization of the FDI regulations reflects the Government’s commitment to reforms and openness, and reassures investors that Ease of Doing Business remains high priority.”
For the uninitiated, below are the key highlights of the aviation FDI reforms unveiled by the government:
(i) The extant FDI policy on Airports permits 100% FDI under automatic route in Greenfield Projects and 74% FDI in Brownfield Projects under automatic route. FDI beyond 74% for Brownfield Projects is under government route.
(ii) With a view to aid in modernization of the existing airports to establish a high standard and help ease the pressure on the existing airports, it has been decided to permit 100% FDI under automatic route in Brownfield Airport projects.
(iii) As per the present FDI policy, foreign investment up to 49% is allowed under automatic route in Scheduled Air Transport Service/ Domestic Scheduled Passenger Airline and regional Air Transport Service. It has now been decided to raise this limit to 100%, with FDI up to 49% permitted under automatic route and FDI beyond 49% through Government approval.
For NRIs, 100% FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49% of their paid up capital and subject to the laid down conditions in the existing policy.