In FDI push centre allows 49% foreign ownership in AI

In FDI push centre allows 49% foreign ownership in AI

Context

In FDI push, Centre allows 49% foreign ownership in AI. Easing of norms puts national carrier on par with other Indian airline companies

In FDI push, Centre allows 49% foreign ownership in AI

The Congress says foreign carriers cannot be allowed to take over Air India.

The Centre on Wednesday eased several foreign direct investment norms, including allowing overseas airlines to own up to 49% of Air India and permitting 100% FDI in single brand retail and construction development under the automatic route.

Conditions

The Union Cabinet allowed foreign airlines to invest up to 49% under the approval route in Air India, “subject to the conditions that: (i) foreign investment(s) in Air India, including that of foreign airline(s), shall not exceed 49% either directly or indirectly and (ii) substantial ownership and effective control of Air India shall continue to be vested in an Indian national.”

Interest from other Airlines

The move comes close on the heels of Singapore Airlines and Tata Group evincing interest in bidding for the debt-laden national carrier.

Present Policy

• As per the present policy, foreign airlines are allowed to invest under the government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital.
• However, this provision was not applicable to Air India. The government, therefore, decided to do away with this restriction.

More jobs

• The changes to the FDI norms would trigger significant interest in the carrier from foreign airlines, KapilKaul, CEO, Indian subcontinent & Middle East, Centre for Asia Pacific Aviation (CAPA), said, adding that the actual terms of the offer and conditions attached would determine the level of participation in the bids
• CAPA anticipates that the divestment would help spur more jobs and growth in Air India.

CAPA

• CAPA India, in October 2017, recommended that the government exit Air India completely. “Any level of equity retention will deter investors due to concerns about the prospect of continued government interference post-privatisation,” it had said at the time
• “No major Indian corporation from outside of aviation will invest in such a complex project without an experienced strategic partner. Allowing foreign airlines to participate will increase the number of interested bidders and the valuation.”

Opposition to the plans however

The government may, however, have to face opposition to its plans to divest stake in Air India.

Should be given a chance to revive

The Parliamentary Standing Committee on Transport, Tourism and Culture, in a draft report, is said to have described Air India as a “national pride” and urged that the airline be “given a chance for at least five years to revive.”

Congress denounced the decision

The Opposition on Wednesday denounced the Union Cabinet’s decision allowing 100% foreign direct investment in single-brand retail and opening up of Air India for foreign investment.

By doing away with the requirement of 30% sourcing through “Make in India” for singlebrand retail for five years, Prime Minister Narendra had exposed his “duplicity and doublespeak” on the issue.

Opposite stance

• Foreign carriers cannot be allowed to take over the national carrier. You can allow equity participation. Clearly the government does not want to infuse funds.
• The CPI(M) criticised the decision. “Having taken the decision to privatise Air India, the Modi government is now moving towards handing over Air India to a foreign airline,” party politburo statement said.
• The UPA govt. was careful to keep Air India out of FDI