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Inter-ministerial consultation 'very soon' on FDI in aviation

india Updated: Nov 14, 2011 21:22 IST
Kingfisher airlines

With cash-strapped Kingfisher Airlines demanding that foreign carriers be allowed to pick up stake in Indian airlines, the Industry Ministry on Monday said it would "very soon" start inter-ministerial consultations on the issue.

"Yes. Suggestions have come from the Civil Aviation Ministry. It is attracting our active consideration. We will be seeking inter-ministerial consultation very soon," commerce and industry minister Anand Sharma told reporters.

According to official sources, the Industry Ministry is for allowing foreign airlines to pick up stake in domestic carriers but with a cap of 26% -- a major move to liberalise the cash-strapped sector.

However, the Aviation Ministry, which was earlier opposing the move on the grounds that it was not a practice in many major countries like the US, has proposed 24%, sources said.

Maintaining that no foreign player will be willing to invest in an Indian entity with a 24% equity cap, sources said such a low stake might not be an agreeable option as that would not give a right to block a special resolution in a company.

Any equity holding greater than 25% gives a right to block a special resolution.

However, a strong feeling exists among major airlines, like Jet Airways, that fledgling Indian carriers would be susceptible to hostile takeovers as they have been passing through a difficult financial period. But the proposal has seen open support only by Kingfisher promoter Vijay Mallya.

Interestingly, the Federation of Indian Airlines, an umbrella body of Indian carriers, says that "it is important that India seek reciprocal opening of the airline industry in other countries, before allowing open access of its market to foreign carriers".