FDI cap in domestic airlines may go up to 74 per cent

New Delhi: The government is considering a proposal to increase the limit in foreign direct investment (FDI) in scheduled domestic carriers, from 49 per cent to 74 per cent. According to government sources the hike in FDI limit would aid domestic airlines in increasing their funding options, who by now have drawn up huge expansion plans. It is estimated that domestic carriers may buy close to 480 aircraft in the coming five years. If made, such investments would involve funding requirements of close to $30 billion.

Government sources have also indicated that a review panel, set up by the civil aviation ministry to study the issue, may suggest detailed policy changes in this respect sometime early on in 2007.

Over a period of time, foreign private equity firms, institutional investors and NRIs have been increasing their stake in Indian carriers. Industry statistics indicate that foreign holding in SpiceJet and Air Deccan has already reached close to 40 per cent. Other private players, such as Jet Airways, Kingfisher Airlines, GoAir and IndiGo are reportedly in talks with various industry players for mobilising debt and equity.

Civil aviation minister Praful Patel had earlier announced that the government was keen on raising the FDI cap in air cargo, helicopters and non-scheduled carriers from 49 per cent to 74 per cent. According to Patel, raising the FDI cap in airports and airlines was important if the government was to achieve its long-term goal of creating an aviation grid of 400 airports and airstrips across the country.

The government has already allowed 100 per cent FDI in airports, through the automatic route.