The Centre on Tuesday opened up the civil aviation sector to foreign investment by allowing 100 per cent foreign direct investment (FDI) in ground handling and helicopter services. To give a boost to regional connectivity, the Centre allowed the entry of foreign regional carriers into the country by allowing 49 per cent FDI under automatic route. However, there are no plans to relax norms for FDI in scheduled airlines. At present, 49 per cent FDI is permitted and foreign carriers have invested in domestic scheduled airlines.
Experts said allowing foreign investment in helicopter and air charter operations would be a game changer. “FDI in the helicopter sector is very positive. With the draft civil aviation policy providing a structural lift to the helicopter operations in India, 100 per cent FDI will bring in capital and expertise and shift dynamics completely,” said Kapil Kaul, chief executive officer at Centre for Asia Pacific Aviation.
Both the recent changes — completely aligning policy to the needs of the sector and 100 per cent FDI — will be game changing for non- scheduled operations especially helicopter operations in India,” said Kapil Kaul, chief executive officer at Centre for Asia Pacific Aviation.
At present, up to 74 per cent FDI is allowed in non-scheduled air transport service with investment up to 49 per cent through automatic route and investment between 49 per cent and 74 per cent requiring government’s approval.
The Union civil aviation ministry, in its draft policy released last week, had put emphasis on helicopter operations. It said separate regulations will be notified by the government next year and talked about developing four helicopter hubs in the country. It proposed liberalisation of several other norms related to helicopter operations. The government’s decision to liberalise FDI norms in this segment will come as a boost, as there are less than 300 civilian helicopters in the country compared to over 1,300 in Brazil.
Foreign investment in ground handling services have been liberalised by allowing 100 per cent FDI in setting up a ground handling agency (GHA) without the government’s approval. However, the mandatory GHA licensing, which includes security clearances, by the Directorate General of Civil Aviation (DGCA) will still be required. At present, up to 49 per cent FDI is permitted in ground handling services under the automatic route. FDI above 49 per cent and up to 74 per cent is permitted with government’s approval.
“Another welcome move as it allows existing and new ground handling firms to plan for more aggressive expansion and investment. The existing 26 per cent requirement for Indian investment in ground handling couldn’t attract serious Indian players and constrained the operational and strategic development of the sector,” Kaul said.
Ground-handling services is an essential part of an airline operation, including check-ins, luggage handling, aircraft cleaning and servicing, loading and unloading of food and beverages along with cargo handling. Airlines handle these on their own at most airports, including Chennai, Kolkata and Chandigarh, to cut costs and improve punctuality. At some airports, airlines give contracts to the airport or handling agencies too. However, foreign airlines are not permitted to self-handle and they avail the facility of third-party handlers.
The civil aviation ministry, in its draft policy, has said airlines would be allowed to self-handle operations at all the airports. This was a major relief to airlines.
Kaul said allowing FDI in regional air services “will help in easing the entry but no significant impact is expected”. The draft civil aviation policy had put emphasis on regional airlines by proposing a regional connectivity scheme.
