Aviation FDI policy excludes Air India

29 Aug 2017


The government's consolidated foreign direct investment (FDI) policy, released on Monday, suggests that foreign airlines may not be allowed to buy a stake in the national carrier Air India.

In the sub-section which allows foreign airlines to invest up to 49 per cent paid-up capital of domestic passenger carriers, the 'Consolidated FDI Policy' released by the ministry of commerce and industry on Monday states that the policy is not applicable in the case of Air India.

The policy, however, allows foreign airlines to own up to 49-per cent stake in other domestic passenger carriers, subject to certain conditions.

The development comes at a time when the central government has decided to divest its stake in the airline.

Interestingly, Air India's key properties being put up for sale are expected to net only Rs500 crore. This is just 1 per cent of the amount that the airline owes lenders.

A ministerial group headed by finance minister Arun Jaitley is presiding over the Alternative Mechanism formed to look into the modalities of Air India`s divestment process.

The group will guide the strategic divestment process and decide on key issues such as treatment of the airline's debt and hiving-off of its assets.

The airline, which reported an operating profit of Rs105 crore in 2015-16, is expected to report a higher operating profit for the 2016-17 financial year.

Air India is under a Rs30,000-crore turnaround package (TAP) and financial restructuring plan (FRP) to be rolled out by the year 2021.

The plan was approved by the earlier United progressive Alliance (UPA) government on 12 April 2012.

The government, in June last year, decided to allow 100-per cent investment by foreign entities, and not airline companies, into the aviation sector to own and operate air carriers. The investment of foreign airlines in Indian companies remained limited to 49 per cent.

Jet Airways has investments from Etihad Airways, while Singapore Airlines has investments in the Vistara and AirAsia airlines while Qatar Airways has shown interest in starting an airline.

In June, however, the government came out with plans to privatise Air India. InterGlobe Aviation Ltd, which runs IndiGo, has shown interest in acquiring the overseas operations of the airline.

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