The Civil Aviation Ministry has rejected a proposal to increase the foreign direct investment limit in domestic airlines to 74 per cent from the existing 49 per cent.
However, in a move that is likely to facilitate foreign companies registered in India import aircraft for their use, the Ministry has given its nod to allow 100 per cent FDI in the general aviation and non-scheduled operators permit (NSOP) category through the automatic route.
According to the Ministry, this is not the right time to hike the FDI cap in domestic airlines as the industry is just “testing the waters”. Last September, the Government allowed foreign airlines to invest up to 49 per cent in domestic airlines. Yet, none of the four airlines — Jet Airways, SpiceJet, IndiGo and GoAir — that were eligible suitors for foreign airlines approached the Government seeking a hike in the current FDI limit.
The 74 per cent proposal was recommended by the Arvind Mayaram panel, which is seeking to hike the FDI limit in various sectors, including Defence and telecommunication, besides aviation, to attract more foreign investments and stem the rupee’s slide.
If the proposal on general aviation is accepted, airline companies will be able to approach the Civil Aviation Ministry directly and import aircraft if they meet all the foreign exchange rules. At present, these proposals are cleared by another wing of the Government before a company can approach the Civil Aviation Ministry.
The NSOP category has almost 150 players importing aircraft or helicopters, which are then chartered out.
Most players in the sector have less than five machines each, barring state-owned helicopter operator Pawan Hans and Global Vectra.
Analysts say if the intention of opening up the sector is to get more foreign funds, then NSOP is the wrong category to look at, as the amount the Government will be able to attract will be very small.