FDI in aviation sector put on ice

New Delhi: The Central Government may have put on hold the 26 per cent foreign direct investment (FDI) proposal for the aviation sector. The back tracking takes place even as the government's policy of allowing 51 per cent FDI in retail has backfired spectacularly.

It is being given to understand that the government may have developed cold feet as any move at this juncture to allow enhanced FDI in aviation sector could be perceived as an effort by the government to bail out the cash-strapped domestic airlines.

Earlier, chiefs of domestic carriers had met prime minister Manmohan Singh on 26 November, seeking review of aviation policies and allowing FDI in domestic airlines. These included Jet Airways' Naresh Goyal, IndiGo's Rahul Bhatia, SpiceJet CEO Neil Mills and GoAir's Jeh Wadia.

Initially, the finance and civil aviation ministries had quibbled over the quantum of FDI to be allowed in the sector with the finance ministry favouring the recommendation of the Department of Industrial Policy and Promotion (DIPP) to allow 26 per cent as against the aviation ministry's recommendation of 24 per cent.

The finance ministry had suggested that DIPP should consult the Securities and Exchange Board of India on the issue as several airlines, including Kingfisher and Jet Airways, are listed companies, officials in the industry ministry said.

Under the SEBI's Takeover Code, an open offer is triggered once an investor acquires 26 per cent stake in a listed company.