The Hindu Business Line : Foreign airline FDI still off domestic civil aviation turf

New Delhi, Jan. 30 The Government has stuck to its policy of not allowing foreign airlines to acquire a stake either directly or indirectly in Indian passenger airlines, charter airlines or non-scheduled airlines. The only exception is cargo airlines, where foreign airlines may be allowed to pick up a 74 per cent stake through the automatic route.

Domestic aviation players, especially the low cost airlines, and the Planning Commission have been pressing the view that the Government should have a re-look at the policy of barring foreign airline investment in the domestic industry.

“The domestic airline industry is suffering huge losses. There is a need to allow strategic investors and allowing foreign airlines into the domestic sector would have helped,” the Executive Chairman, SpiceJet, Mr Siddhanta Sharma, told Business Line. The Planning Commission had also called for allowing foreign airlines to participate in domestic airlines in an official communication.

The Union Cabinet, in a meeting here on Wednesday, was, however, of the opinion that the FDI in air transport services should continue to be capped at 49 per cent through the automatic route. But non-resident Indians can hold up to 100 per cent in domestic passenger airlines.

Reclassification

At its meeting today, the Cabinet also approved reclassification of the passenger aviation sector as ‘domestic scheduled passenger airline sector.’ It also decided that FDI up to 74 per cent would be allowed in ground handling services through the automatic route. Non-resident Indians would be allowed to invest 100 per cent in similar activities through the automatic route.

MRO facilities

The Cabinet decision also allows 100 per cent FDI through the automatic route in the setting up of Maintenance Repair and Overhaul facilities, flying training institutes, technical training institutions, helicopter and sea plane services. These projects would, however, need to be cleared by the safety regulator, the Directorate General of Civil Aviation.

Commenting on the Cabinet decisions, Mr Kuljit Singh, Partner, Transaction Advisory Services at Ernst & Young, said that the decision to liberalise the MRO, ground handling and cargo airlines areas was likely to generate substantial interest among foreign investors.

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