Govt to fast-track proposal for FDI in domestic airlines

Security concerns to be addressed by strict screening

New Delhi, May 20:

The Government plans to fast-track the proposal to allow foreign airlines to invest in domestic airlines once the ongoing Parliament session ends on May 22.

It was in January this year that the Civil Aviation Ministry had announced a “broad consensus” in the Government on allowing foreign airlines to acquire an up to 49 per cent stake in domestic airlines. But the proposal is yet to be approved by the Government.

At the moment, the proposal is undergoing inter-Ministerial consultations before it is brought to the Union Cabinet for final approval. Official sources confirmed to Business Line that the proposal will be accelerated soon after the Parliament session is over.

The Indian Government used to allow foreign airlines to invest in domestic airlines when the sector was first opened in the early 1990s. At least three West Asian carriers, including Kuwait Airways and Gulf Air had invested in Jet Airways. However, when the policy was changed and foreign airlines were banned from having a direct or indirect stake in domestic airlines, the foreign airlines' stake was bought by Jet Airways.

Growing interest

Officials claimed that, contrary to the public posturing, a number of domestic airlines have informally approached the Ministry of Civil Aviation, seeking that the proposal be pushed through at the earliest. Besides, a number of global private equity funds that traditionally have a stake in several leading international airlines have also been making discreet inquiries from the Ministry on the issue.

Official sources said that foreign investment in Indian carriers is being given a thrust right now because most domestic airlines are bleeding and banks in India are reluctant to fund most of them.

So, there are only a few options left to keep them afloat.

Even as the Government starts the process of implementing a change in policy, there has been a steady stream of chief executive officers and owners of global airlines visiting the Ministry of Civil Aviation.

In March this year, the Chairman and Chief Executive, Emirates Airlines and Group, Sheikh Ahmed bin Saeed Al-Maktoum, visited the Ministry of Civil Aviation. Emirates is one of the most profitable airlines in the world.

Earlier this month, it announced the 24th consecutive year of profit-making, posting a profit of $629 million.

The CEO of a European airline, along with the promoter of a private airline in India, also called on Civil Aviation Ministry mandarins earlier this month.

Officials pointed out that, as and when the change in policy is brought about, there will be adequate checks and balances to ensure that investments from countries or sources that are detrimental to India's security are blocked.

Strict screening

Each proposal by a foreign airline will have to be cleared by the inter-Ministerial Foreign Investment Promotion Board (FIPB). With the Home Ministry being a part of FIPB, any proposal considered against India's security interests will be blocked, officials said.

http://www.thehindubusinessline.com/todays-paper/tp-corporate/article3440089.ece