Ajit Singh says airline FDI cap stays at 49%

Civil Aviation Minister Ajit Singh on Friday said the sectoral cap for foreign investment in domestic airlines remained unchanged at 49 per cent.

He was clearing the air on the confusion created by a Department of Industrial Policy & Promotion (DIPP)  note suggesting the sectoral cap had been revised to allow foreign investment over 49 per cent.

Last Friday, the Centre revised the rules to allow foreign airlines to invest in domestic ones. A formal notification was issued yesterday, saying the 49 per cent cap would subsume foreign direct investment (FDI) and foreign institutional investment (FII) in the airlines. However, on Friday, the commerce ministry while responding to media queries on the issue said FDI and FII would not be subsumed.

This clarification had, erroneously, suggested foreign airlines could invest up to 49 per cent in the paid-up capital of an airline, irrespective of the existing or future FII. The DIPP is to now issue a clarification on the clarification that created more confusion.

According to a senior official in the department of industrial policy and promotion," We will be issuing a clarification on this. FDI and FII is subsumed within that 49 per cent. FII alone can go up to 24 per cent."

Singh asserted the 49 per cent cap remained intact. "It is going to be 49 per cent. It is a cabinet decision. All we have done is to allow foreign airlines to invest in domestic airlines,'' he told Business Standard. Singh said he was unaware of the commerce ministry's press note.

The government is also in process of formally revising the permissible limit for FIIs in domestic airlines. Until now, FIIs could hold up to 49 per cent (since foreign airlines were disallowed).

Now, with the sector cap remaining the same, FIIs will be allowed to hold up to 24 per cent. With Indian aviation companies having FII even below 10 per cent, it leaves a lot of scope for airlines to invest. As on June, Jet Airways had 7.12 per cent, SpiceJet 3.59 per cent and Kingfisher merely 0.98 per cent of FII holding.