Even the Home Ministry has some reservation from security angle

The Government is unlikely to take a decision on allowing foreign airlines to pick a maximum of 49 per cent equity in domestic airlines, at least till the Budget session is over. The Budget session of Parliament gets over on May 22.

The market appeared to have got wind of this on Thursday, as all the three listed scheduled airlines, Jet Airways, Kingfisher and SpiceJet, got a hammering. In fact, Kingfisher's stock once again breached the psychological benchmark of Rs 15 and closed below it.

A Government source said: “There is no political consensus yet. Efforts are on.”

Meanwhile, the Civil Aviation Minister, Mr Ajit Singh, informed the Lok Sabha in a written reply, “The proposal to allow investment by foreign airlines in the domestic carriers is under examination of the Department of Industrial Policy and Promotion.”

A detterent

The existing policy allows foreign direct investment up to 49 per cent in scheduled domestic airlines. However, the rider is that only those foreign companies with no direct or indirect relations with aviation business are eligible to make investment. Experts feel this has deterred many potential investors from coming into India.

Though in February, a Group of Ministers recommended the relaxation of norms followed by circulation of the draft Cabinet note. The matter is yet to reach its logical conclusion. It is believed that not only key ally Trinamool Congress is against the move, but even the Home Ministry has some reservations from the security point of view.

It is also believed that the Home Ministry has specific concerns about investments from certain parts of the globe, including the Gulf region. However, the Civil Aviation Minister, Mr Ajit Singh, had said that once the policy is approved, every FDI proposal will go through approval route. It means Foreign Investment Promotion Board will examine proposals on a case to case basis after obtaining views from various ministries.

Fails to pacify

It has also been said that for foreign airlines picking up equity up to 49 per cent, it will be mandatory to have two or three Indians on the board as directors. This will ensure that control will remain with Indian hands. However, even these safeguards have failed to pacify those opposed to the move.


(This article was published on May 3, 2012)
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