The Government has clarified that when foreign airlines invest in the capital of Indian airline , they can do so up to the limit of 49 per cent of the paid-up capital of these companies irrespective of whether it is a foreign institutional investor or financial institution making the investment.

The Union Cabinet had recently changed the policy and allowed foreign airlines to acquire a 49 per cent stake in domestic airlines.

The changed FDI norms were notified on Thursday.

Industry analysts say that FII is short-term capital which will not flow in to the company running the airline while allowing FDI into the sector has long-term strategic implications.

“Clubbing the two is diluting the policy. Legally and theoretically the two are different,” said Dhiraj Mathur, Executive Director and Head of National Aerospace and Defence Practice, PwC.

(This article was published on September 21, 2012)
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