In what could breathe life into the loss-ridden aviation industry, the government will shortly consider a proposal to allow foreign airlines pick up to 49% equity in Indian carriers. This is despite stiff opposition from the country’s largest private airline, Jet Airways.
A committee of secretaries chaired by Cabinet secretary KM Chandrasekhar, set up to consider FDI in sensitive sectors, will take up the proposal on November 17, a government official told The Indian Express. The government now allows 49% foreign direct investment (FDI) in domestic carriers but bars foreign airlines from holding any stake directly or indirectly.
Initially, the civil aviation ministry had recommended that foreign airlines be allowed to take up to 25% in domestic airlines. The ministry had kept it at less than 26% since that level would have given foreign airlines a say in the management of the company. But the department of industrial policy and promotion (DIPP), the nodal department for FDI policy, suggested that foreign airlines be permitted to acquire up to 49%.
The officials said that even the National Aviation Company of India Ltd of Air India also came under the purview of this proposal. But they asserted that there were no plans to either sell government stake in the national carrier or induct a foreign partner.
Most domestic airlines are in the red today with negative traffic growth and declining premium and business travel. Jet Airways, Kingfisher Airlines and SpiceJet recently posted losses of Rs 406 crore, Rs 418 crore and Rs 101 crore, respectively, for the second quarter ended September 2009.
Kingfisher Airlines chief Vijay Mallya had met the finance minister recently after the company reported the loss. The details of the discussion could not be confirmed. But, Kingfisher is open to FDI and Mallya had last year said the company had received feelers from certain foreign carriers. It is expected that the proposal, if cleared, will enable the domestic carriers to raise funds. Last year, foreign carriers Virgin Atlantic Airways and British Airways had shown interest in buying a stake in Indian carriers.
The proposal, first mooted over a year ago, was stalled with a section in the Cabinet committee on security raising security concerns about foreign carriers holding significant equity in Indian airlines.
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