Govt mulling 26% FDI in airlines
Various ministries are “actively considering” the proposal to allow foreign direct investment (FDI) by foreign airlines in domestic carriers.india Updated: Dec 04, 2011 20:58 IST
Various ministries are “actively considering” the proposal to allow foreign direct investment (FDI) by foreign airlines in domestic carriers.
At present, India allows FDI of up to 49% in Indian carriers, but foreign airlines are banned from investing in them. The department of industrial policy and promotion (DIPP) has favoured a 26% cap on foreign airlines’ holding. A holding above 25% gives the right to block a ‘special resolution’.
Sources said the aviation ministry, which it had earlier suggested a 24% stake, was reconsidering its stand and the home ministry and the planning commission could well support the DIPP proposal.
“The three arguments against FDI by foreign airlines — security issues, price war and hostile takeover — are baseless,” a top government official told Hindustan Times.
“There is a well-defined security system in place with proper checks and balances. Secondly, hostile takeover cannot be possible with a minority stake. Thirdly, even after 100% ownership, (domestic) private carriers are finding it hard to tackle fares offered by Air India,” he said.
“The argument that FDI will hurt AI is also ridiculous,” said another official. “What FDI would bring is better services, management and on-time performance.”