Foreign airline stockholding in domestic carriers under consideration
06 Nov 2009
New Delhi: Reeling under massive losses, the Indian aviation industry may get a reprieve of sorts with the central government apparently readying to consider a proposal to allow foreign airlines to pick up to 49% equity in Indian carriers.
According to unconfirmed reports, a committee of secretaries set up to consider FDI in sensitive sectors will take up the proposal on 17 November.
Currently the government permits 49% foreign direct investment (FDI) in domestic carriers but prohibits foreign airlines from holding any stake directly or indirectly.
The move comes with the Department of Industrial Policy and Promotion (DIPP), the nodal department for FDI policy, recommending that foreign airlines be permitted to acquire up to 49%.
Interestingly, any such move to ease up investment policies would also be applicable for the National Aviation Company of India Ltd, the holding company for Air India.
Much the same as their international counterparts, domestic carriers too are in the red with negative traffic growth and declining travel. Leading domestic carriers, Jet Airways, Kingfisher Airlines and SpiceJet have posted losses of Rs406 crore, Rs418 crore and Rs101 crore, respectively, for the second quarter ended September 2009.
The move to ease investment policy in the aviation sector is expected to enable domestic carriers to raise funds. Last year, foreign carriers Virgin Atlantic Airways and British Airways had expressed interest in picking up stake in Indian carriers.
Earlier attempts to reform policy in the aviation sector have failed as 'security' concerns have been cited. It is not clear what these security concerns are and its time the government spelt them out.
