Aviation FDI cap hiked to 49 per cent

By Our Economy Bureau | 21 Oct 2004

New Delhi: The union cabinet, on Wednesday, hiked the FDI cap in domestic airlines to 49 per cent from the existing 40 per cent. However, foreign airlines will not be a direct beneficiary of the FDI hike since they will not be allowed to pick up a stake directly or indirectly.

The cabinet had said earlier that non-resident Indians and overseas corporate bodies (OCBs) would be allowed to hold 100 per cent equity in domestic airlines through the automatic route.

Earlier, this was allowed only through the Foreign Investment Promotion Board (FIPB) route. The finance minister, P Chidambaram, had proposed a hike in the FDI caps in the aviation, telecom and the insurance sector in his union budget speech for 2004-05.

However, the proposal was mired in controversy with the Left parties expressing their opposition to hiking the existing caps in the three sectors.

It now appears that after prolonged negotiations, the Left has somewhat softened its stance on the FDI cap in airlines while remaining firm in opposing hikes in telecom from 49 per cent to 74 per cent and in insurance from 26 per cent to 49 per cent.

Commenting on the cabinet decision, the minister for civil aviation, Praful Patel, said that the decision was a "pro-liberalisation" move.