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'India proposes foreign investment in airlines'

india Updated: Nov 29, 2011 19:52 IST
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India's aviation ministry said on Tuesday it supports allowing foreign airlines to invest in the country's cash-hungry carriers, but added that a final decision must be made by the cabinet.

Permitting foreign investment could bring much-needed capital for India's cash-strapped Kingfisher, Jet and other airlines which have been battling to keep in business in the fiercely competitive aviation market.

Foreign investment "is acceptable till a limited point," civil aviation minister Vayalar Ravi told CNBC news channel. But he said the level to which foreign investment should be allowed was still under discussion.

He said the aviation ministry had proposed allowing "less than 26%" investment by international airlines in domestic carriers.

The industry ministry earlier this month suggested permitting 26% foreign investment, saying the domestic airlines were "in dire need of funds" to compete with global carriers.

Ravi said the cabinet would have the final word but did not say when.

A decision by the Congress party-led government last week to allow foreign retailers to own 51% of multi-brand supermarkets has raised expectations it may also allow foreign carriers to buy stakes in domestic airlines as it pursues its economic reform agenda.

The television report came after executives of some of India's largest airlines met Prime Minister Manmohan Singh last week to seek government assistance for the beleaguered industry.

India's airlines may lose a total of $2.5 billion in the year ending in March 2012, according to the Centre for Asia Pacific Aviation, an industry body.

The airlines have been demanding change in the aviation policy to allow foreign airlines to pick up stakes in Indian carriers and provide cash infusions.

Earlier this month, Singh said airlines should be managed efficiently, "but if they do get into difficulties, we have to find ways in supporting the development of the country".

On the surface, demographics make India, a country of 1.2 billion, an attractive story. India's passenger aviation sector is estimated to be growing at between 15 and 20% each year.

But all of India's six main airlines -- barring budget carrier IndiGo -- announced steep losses in the financial quarter to September.

Ravi said the aviation ministry was also urging state governments to reduce steep taxes on sales of jet fuel.