Monday, August 28, 2017

Consolidated FDI policy may hurt Air India stake sale, Tatas likely to skip it altogether

New Delhi: If the government were to indeed bar foreign airlines’ participation in the disinvestment process for Air India, then it can immediately rule out participation of its favourite bidder, the Tatas. Sources close to developments said on Monday that unless the Tatas are allowed to partner with Singapore Airlines in any prospective bid for the ailing Air India, they may choose not to put in a bid at all. Indeed, the much-hyped disinvestment process for the ailing Air India would receive a huge setback if the government bars foreign airlines from participating in the process.

When the government publicly expressed its intent to disinvest Air India for the first time earlier this year, it had approached the Tatas before anyone else to ascertain interest – since Air India was a Tata airline in its earlier avatar and JRD Tata had helmed it to remarkable for years before the government took over. So now, if it indeed rules out foreign airline investment in Air India, the Tatas may well say bye bye.

In the consolidated FDI circular published this afternoon, the Department of Industrial Policy and Promotion (DIPP) has said that foreign airlines are also allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49 percent of their paid-up capital, subject to some riders. But it has clarified that this part of the policy is not applicable to Air India. While this has been the government’s stated position all along – the FDI circular of 2016 uses the exact same words when dealing with FDI caps in the civil aviation sector – the continued emphasis on keeping Air India out of the purview of any investment by foreign airlines has surprised industry veterans.

They hope that the bar on foreign airlines investing in Air India is lifted, if and when the disinvestment process gets started. But as of now, the statement vis-Ă -vis Air India shows the government’s aversion to foreign airlines – it could also mean that the government may want to retain majority control even if after it puts the airline through the disinvestment process. Why else would Air India be treated any separately from other Indian airlines even after disinvestment, unless the government continues to exercise control over the airline?
28/08/17 Sindhu Bhattacharya/First Post