Finance Ministry supports 26% FDI in aviation

New Delhi: Amidst differences within the industry, the Finance Ministry has lent its support to the Department of Industrial Policy and Promotions (DIPP) on allowing foreign airlines to pick up up to 26 per cent equity in domestic airlines.
Once various ministries give their views, this proposal will be sent to the Cabinet for final decision.
“We have agreed to the proposal of DIPP for allowing 26 per cent FDI by foreign airlines in domestic carriers,” a senior Finance Ministry official told Business Line. On the other hand, the Civil Aviation Ministry still maintains its position of restricting the cap to 24 per cent.
The 26 per cent limit is considered to be a better option for any foreign investor as it allows veto rights in board decisions. The 24 per cent limit makes an investor an ordinary shareholder without veto powers on the board of the airline.
At present, barring foreign airlines (direct or indirect), foreign investors can invest up to 49 per cent in any scheduled domestic airlines. Scheduled domestic airlines is defined as a carrier which operates with a minimum of five aircraft and operates a fixed schedule.
Earlier, it was argued that foreign airlines, with stronger balance sheets, can easily outshine Indian partners. Security concerns were also raised, especially regarding foreign airlines belonging to the Gulf and African regions.
02/12/11 Shishir Sinha/Business Line

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Categories: Foreign Dec 2011, Indian Aviation- In General Dec 2011