Civil aviation min favours higher FDI cap: report

The Civil Aviation Ministry is likely to drop its opposition to higher investment by foreign airlines in the sector and agree to let them hold up to 49% in domestic carriers, a business daily reported on Saturday, citing an unidentified ministry official.

The country's new civil aviation minister, Ajit Singh, believes that international carriers could be allowed to hold a more than 26% stake, the official told the newspaper.

The ministry, under Singh's predecessor, Vayalar Ravi, had proposed allowing foreign airlines to invest less than 26% in Indian carriers.

India at present bars foreign carriers from owning stakes in Indian airlines, though foreign investors are allowed to invest up to 49%.

"We may further relax our stance on allowing foreign carriers to invest in Indian airlines. There is no difference between 26% and 49% because the rights of the shareholders remain the same at these two different levels of shareholding," the official was quoted as saying.

A ministry spokesman was not available for comment.

The higher permissable investment would come as a lifeline to India's struggling carriers, notably debt-laden Kingfisher Airlines which is struggling to raise funds.

Doubts over the revival of Kingfisher intensified after the country's top lender, State Bank of India, said this week it considered its loans to the airline to be non-performing. Other lenders were also concerned about their exposure to Kingfisher, a banking source told Reuters.

India's ailing airlines are expected to post a combined loss of $2.5 billion-$3 billion for the year ending in March 2012, according to a forecast by the Centre for Asia Pacific Aviation.