Aviation FDI: Cautious, Centre set to take allies on board

Civil Aviation Minister Ajit Singh to meet TMC chief Mamata Banerjee on May 5

Once bitten, twice shy. Stung by the strong attack from its allies after the Cabinet had cleared foreign direct investment (FDI) in multi-brand retail, the government has now decided to first bring about consensus among its allies before allowing foreign carriers to invest in domestic ones.

The government has decided to consult allies like the Trinamool Congress (TC) and the Dravida Munnetra Kazhagam (DMK) before any resolution on extending the ambit of FDI to aviation by allowing foreign carriers to buy stakes in Indian ones.

“Civil Aviation Minister Ajit Singh will meet TC chief Mamata Banerjee on May 5, when she would be in New Delhi to attend a meeting on the National Counter-Terror Centre. A meeting with DMK would also he held soon. A decision has been taken to not move any proposal without taking the allies on board,” said a senior minister, on the condition of anonymity.
 

SUNNY SKIES AHEAD?

• Currently, foreign investors not related to the aviation business are allowed to hold stakes of up to 49 per cent in Indian carriers
• The government feels foreign airlines should be allowed to buy stakes of up to 49 per cent in Indian ones
• Kingfisher Airlines, SpiceJet and GoAir are waiting for the government to bring about clarity in FDI norms

In December, the government had to roll back its decision to allow FDI in multi-brand retail and limit it to single-brand retail after Mamata Banerjee objected to the move.

According to current norms for FDI in aviation, foreign investors not related to the aviation business are allowed to hold stakes of up to 49 per cent in Indian carriers. However, foreign airlines are barred from doing so, owing to security reasons.

The minister added FDI in aviation may not see the light of the day till May-end. “Parliament will be in session during most of May, leaving only the last few days for clearing this proposal,” he said.

The government, which was earlier undecided on the limit of stakes foreign airlines should be allowed to buy, has now decided these can acquire stakes of up to 49 per cent. A decision on this taken at a meeting of senior ministers, including Finance Minister Pranab Mukherjee, Civil Aviation Minister Ajit Singh and senior officials from other ministries.

The civil aviation ministry had earlier favoured allowing foreign carriers to buy stakes of up to 24 per cent, while the commerce ministry wanted the limit to be 26 per cent.

The decision to allow foreign airlines such as Emirates, Lufthansa, British Airways and Etihad to invest in domestic carriers was taken to save the cash-hungry Indian aviation sector, reeling from soaring fuel costs, swelling debts, high taxes and cut-throat competition. The move would also usher in international technical know-how and global expertise.

Kingfisher Airlines, SpiceJet and GoAir are waiting for the government to bring about clarity in FDI norms. While Kingfisher Airlines would need a foreign partner to revive it, SpiceJet and GoAir are looking to gain by securing international expertise and route networks.