Foreign airlines get all-clear signal on FDI

New Delhi: A key group of ministers on Tuesday reached a consensus on allowing foreign airlines to buy up to 49 per cent stake in Indian carriers. Foreign carriers are not currently allowed to directly or indirectly make any investment in Indian carriers.
“We have reached a consensus on allowing foreign carriers to buy 49 per cent stake in Indian airlines and a Cabinet note will be moved soon,” said Union Civil Aviation Minister Ajit Singh after a meeting with Finance Minister Pranab Mukherjee, also attended by secretaries of the civil aviation, commerce and petroleum ministries.
The move is expected to open the doors to international carriers looking to leverage the large domestic network of Indian carriers. It could also provide a reprieve to airlines under financial strain and looking to raise funds. Private equity funds are not interested in the sector and raising money through debt is becoming difficult, with banks not keen to fund the sector further.
Varying views have been put on the table on what the cap should be for foreign carriers wanting to invest in Indian carriers. The limit was a bone of contention between the civil aviation ministry and commerce ministry. The aviation ministry had recommended a figure of 24 per cent but the commerce ministry wanted 26 per cent. The commerce ministry felt no foreign carrier would come if it did not get a say (which it would if allowed to buy 26 per cent). The civil aviation ministry was averse to 26 per cent as that could trigger an open offer, giving 20 per cent more to the buyer.
18/01/12 Business Standard

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Categories: Foreign Jan 2012, New Jan 2012