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Context
The decision to allow 49% foreign stake in Air India sets the stage for its privatisation
A key change in FDI norms
Allowing up to 49% overseas ownership, including by a foreign airline, in Air India. This comes just a little more than six months after the Cabinet Committee on Economic Affairs gave its nod for a strategic disinvestment of the airline
Significance of the move
It clears the decks for possible bidders such as the Singapore Airlines-Tata combine and Jet Airways — with its overseas equity and route partners — to make a more detailed commercial assessment of the investment opportunity the state-owned flag carrier presents
Other key change in FDI norms
The other reform cleared by the Cabinet was the crucial decision to put 100% FDI in Single Brand Retail Trading under the ‘automatic’ route, accompanied by the long-sought relaxation of mandatory local sourcing norms
A major issue: This had been a major issue with potential investors including Apple, which had repeatedly urged the government to take a more benign view given the level of technological advancement incorporated in its products and the difficulty in finding local sources of supply at the requisite scale
Significance
- The five-year holiday on the 30% local-sourcing requirement is expected to give companies setting up shop here adequate time to identify, train and even technologically assist in the creation of local supply chain
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