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Wednesday, Sep 25, 2002

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Foreign airlines may not be allowed domestic stake

Ashwini Phadnis

NEW DELHI, Sept. 24

EVEN as the proposal for hiking the level of foreign direct investment (FDI) in domestic airlines from 40 to 49 per cent is expected to get the nod from the Government, the proposal for allowing foreign airlines to pick up stake in the domestic sector is likely to fall by the wayside.

Official sources told Business Line that the Government is unlikely to have any problem in the FDI cap in domestic civil aviation sector being raised to up to 50 per cent. "Raising the FDI cap from 40 per cent to 49 per cent or even 50 per cent will not be a problem. But when it crosses 51 per cent, there could be a problem as substantive ownership is likely to cease to be in Indian hands," official said.

However, the timing of the issue being raked up is causing intense speculation. Sources pointed out that when there was a need for a higher level of FDI being allowed in the sector, the Government did allow it.Defending the action of the Government, officials indicated that in a sector like airports, 100 per cent FDI was allowed as it was considered necessary. Besides, the impact such a move would have on the functioning of the state-owned domestic carrier would also have to be factored in before a final decision was taken, sources said.

"Why is the issue being raised at this moment? Just look at the global scenario, not too many international carriers, apart from some in the Gulf region, would be interested in picking up a stake in airlines in India at the moment," source said.

However, officials indicated that the present mood within the Cabinet, with some of the known pro-FDI Ministers sitting silent when the N.K. Singh Committee report was taken up, was proving to be the biggest dampener for hiking FDI levels in several sectors.

Meanwhile, the Dubai-based Emirates denied that it was interested in picking up a stake in an airline in India.

"We have no intention at present of picking up a stake in any domestic carrier in India," an Emirates spokesman told Business Line from Dubai.

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