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Wednesday, Jun 02, 2004

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Govt mulls 49 pc FDI cap in Delhi, Mumbai airports

Ashwini Phadnis

New Delhi , June 1

THE Government is considering a proposal to cap at 49 per cent the foreign direct investment (FDI) limit in the ongoing process for modernisation and restructuring of the Delhi and Mumbai airports.

Official sources told Business Line that although no decision on the issue has been taken yet, a final decision is expected on June 2.

The move assumes importance as June 4 is the last date for prospective bidders to submit expressions of interest (EoIs).

Meanwhile, officials indicated that this deadline could be extended by a month.

However, the extension is unlikely to see any major shift in the time it is likely to take to complete the modernisation.

The Government could look at absorbing the time that is lost in giving the extension to the bidders by cutting back on the timeframe that may be given for seeking requests for proposal from the prospective bidders.

The cap that the Government may consider is similar to what has been adopted in several countries, including Australia and Mexico, official sources said.

However, opinion is divided on the impact of the proposed decision. While a section feels that the decision to limit FDI to 49 per cent could attract more foreign bidders, especially as the quantum of funds required by an interested bidder could go down, there is apprehension on whether the move to leave significant control with the Airports Authority of India (AAI) and other agencies may scare away potential investors.

The NDA Government had approved the restructuring and modernisation of the Delhi and Mumbai airports through the formation of separate joint ventures between the AAI and successful bidders.

The AAI and other public sector entities would together own 26 per cent equity while 74 per cent would be held by the successful bidder.

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