Saturday, July 06, 2019

Budget 2019: FDI relaxation may help to find buyers for Air India, Jet Airways

The Budget announcement to further relax Foreign Direct Investment (FDI) in the civil aviation sector may help the government to find buyers for Air India as well as Jet Airway, which will also be put up for sale under the bankruptcy proceedings.
Finance Minister Nirmala Sitharaman announced in the Budget today that the government will look at relaxing FDI norms for sectors like Aviation, Media and Single-brand retail. In the same speech, she also announced that the government will continue to go ahead with the divestment of various Central Public Sector Undertakings, including Air India.
This will not be the first time that the government is trying to divest its stake in Air India. An earlier attempt by the government to divest 76% stake in the national carrier did not find any taker.
The government now intends to sell 100% in the national carrier and the move to relax FDI may interest buyers of Air India.
However, there is no clarity on the Substantial Ownership and Effective Control (SOEC) clause yet. The SOEC clause bars any foreign investor from taking complete control of the operations of the airline and be run by a board that has two third members as Indian.
Other announcement of making India a hub for aircraft leasing is also a work in progress and the civil aviation ministry has a committee with various stakeholders, including airlines, to make Ahmedabad’s GIFT city – a tax free zone – as the hub for aircraft leasing.
05/07/19 Mihir Mishra
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