FDI norms relaxation in civil aviation sector could ease Air India divestment

Our Bureau | Updated on July 05, 2019 Published on July 05, 2019

The proposed enhancement of foreign direct investment in the civil aviation sector announced in Union Budget 2019-20 could ease the proposed divestment of Air India.

Delivering the Budget speech, Nirmala Sitharaman talked about the strategic divestment of Air India.

An industry watcher with over four decades of experience in airlines’ finance feels that the proposed relaxation of Foreign Direct Investment in the civil aviation sector will bring the necessary investments and would lead to healthy competition. “However, the Substantial Ownership and Effective Control clause should be protected. Besides, having a SEZ in aircraft leasing would lead to conservation of foreign exchange as millions of rupees are spent in US Dollars for leasing aircraft and paying rentals which can now be made in Indian Rupees. India can become a hub like Dublin in Ireland for leasing companies to set up businesses in India,” he pointed out.

The implementation of proposals stated in the Union Budget 2019-20 will help create jobs in the maintenance, repair and overhaul facilities in the country.

Commenting on the Budget proposals, Ravi Menon, Executive Director, Air Works said that the proposals are not about cost reduction. “Hopefully, the intent stated will create a level playing field in the region in terms of cost competitiveness. The larger benefit will be the progressive development towards self sufficiency in aircraft maintenance and engineering services. India has the potential to transform into a MRO Hub in this region. As the saying goes ‘Even Eagles need a push’. How the stated intent translates into reality will become evident in the next couple of months,” he said.

An MRO player said that implementation of the Budget’s proposals will make the MRO industry viable through a friendly tax regime as airline operators will get their engines and aircraft served in India instead of sending abroad. “The multiplier effect of such MRO businesses could have a far reaching positive impact on the Made in India programme and will encourage operators in this part of the world to send their aircraft to India for major repairs. This will also contribute to better employment opportunities besides significantly contributing to the country’s GDP,” he said.

Menon adds that from an MRO perspective the Make in India programme will graduate from a slogan to a reality.

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Published on July 05, 2019
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