The Centre will not allow foreign airlines to pick a stake in Air India, going by the Consolidated Foreign Direct Investment policy released on Monday.

The policy says that while foreign airlines are allowed to invest in the capital of Indian companies operating scheduled and non-scheduled air transport services up to the limit of 49 per cent of their paid-up capital, “this policy will not apply to Air India.”

In effect, this rules out the participation of any foreign airline in the proposed Air India divestment.

Interestingly, in June, when the Centre moved a Cabinet note on the disinvestment of Air India, the Prime Minister’s Office is said to have insisted that no foreign investor be allowed to buy a stake in Air India. The Centre is not keen to pump in any more funds into the state-owned airline, which has a debt burden of around ₹50,000 crore.

NITI Aayog, the Centre’s think tank, also examined Air India’s finances and suggested divestment as one of the options.

On June 28 the Union Cabinet gave its in-principle approval for the divestment and set up an Alternative Mechanism overseen by the Finance Minister to look into the strategic divestment.

According to existing government regulations, domestic airlines can accept foreign direct investments of up to 49 per cent from a foreign airline. Singapore Airlines thus has a 49 per cent stake in Vistara, in which Tata Sons holds the remaining 51 per cent. Similarly, Malaysia-based Air Asia Berhad is invested in Air Asia India. Tata Sons has a stake in this low-cost airline, also.

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