INDIA : India considers allowing FDI in pax carriers

India’s government is studying a proposal to allow foreign airlines to invest in domestic passenger carriers – something that is already allowed for cargo carriers – a move that could offer vital assistance to cash-strapped Indian airlines.


Air India DIPP


INDIA : India considers allowing FDI in pax carriers

India’s government is studying a proposal to allow foreign airlines to invest in domestic passenger carriers – something that is already allowed for cargo carriers – a move that could offer vital assistance to cash-strapped Indian airlines. “Though the aviation ministry has given an in-principle approval, the sectoral cap will be decided by the Cabinet,” said an official of the Department of Industrial Policy and Promotion (DIPP). While DIPP favours a 26 per cent cap on foreign airlines’ holding, the aviation ministry wants it restricted to 24 per cent as a holding above 25 per cent gives the right to block ‘special resolutions’. India allows 49 per cent FDI in airlines, but in practice this has never been allowed. “No foreign airline 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,” the current policy says. India has five big private operators and a loss-making national carrier, Air India. Although domestic air traffic has been growing at near 20 per cent due to a rising middle class, some carriers have been faring poorly and find it difficult to raise capital in a restrictive FDI regime. In the past, opposition to FDI in aviation has largely come from some private airlines. In the mid-1990s, a proposal from Singapore Airlines to form a venture with industrial giant Tata Group was put on hold by successive governments. The two also had to abandon a joint effort to pick up a stake in Air India in 2001.