New Delhi, June
3:
Amid all the criticism
on policy inaction, the Government is to soon take up a new proposal to allow
foreign airlines to acquire a stake in domestic airlines. The new proposal,
which addresses security concerns that have been raised earlier, is expected to
come up before the Union Cabinet shortly.
Now, sources claim
that various differences between Ministries, and even some political parties,
have been sorted out and accordingly a new proposal has been readied with more
and more safeguards.
One of the key
safeguards suggested is to allow foreign investment only through the inter-ministerial
Foreign Investment Promotion Board route. With the Home Ministry being a part
of the FIPB, any proposal seen as against India's security interests will be
blocked, the source said.
Different limits
A nod for the new
proposal will help domestic carriers get equity support from foreign airlines.
A highly placed Government official told Business Line: “It is expected
that foreign airlines may be allowed to pick up equity of up to 49 per cent in
domestic carriers.”
Currently, the foreign
direct investment limit in scheduled domestic passenger airlines is 49 per cent
and 74 per cent in non-schedule domestic passenger airlines. But the condition
is: “No foreign airlines would be allowed to participate directly or indirectly
in the equity of an air transport undertaking engaged in operating scheduled
and non-scheduled air transport services, except cargo airlines.”
Funding problems
Although the proposal
to liberalise the FDI norms was being discussed last year, it could not be
taken forward, for many reasons. Earlier, the issue was whether to allow 26 per
cent or 49 per cent foreign investment in the domestic airline sector.
A senior Civil
Aviation Ministry official also said that, contrary to popular belief, a number
of domestic airlines are seeking an early decision on this proposal. At the
same time, the chief executive officers of various global airlines have been
visiting the Ministry, seeking details of the proposal. All the three listed
domestic airlines have posted higher losses for fiscal 2011-12. The big problem
is that banks are hesitant to give money to airlines. So, the hope lies in
foreign funding.
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