Foreign airlines may be allowed to invest
By siliconindia   |   Wednesday, 15 September 2004, 19:30 IST
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NEW DELHI: This could be a big turn-on for global aviation majors, but with a big if. The finance ministry has recommended that foreign airlines be permitted to invest in Indian aviation, and that the investment be routed through the automatic route. There is, however, a small hitch. The civil aviation ministry is not convinced about allowing foreign airlines to acquire equity in aviation. The issue is shortly expected to go up to the Cabinet for a decision, official sources told Economic Times, a business daily in India. According to sources, a note allowing foreign airlines to invest in domestic aviation has already been moved and the civil aviation ministry is said to be examining the proposal. The finance ministry, however, has not put any deadline for the proposal to be considered. When contacted, civil aviation minister Praful Patel said that his ministry was against letting foreign airlines invest in Indian aviation. “We would place our objections on the issue when the time comes,” he said and added that his ministry, however, has no objections to putting FDI in aviation under the automatic route. It may be pointed out that the government had recently proposed extending the FDI limit in aviation from 40% to 49% but had kept out foreign airlines. The country has gone back and forth over the issue. Till about eight years ago, foreign airlines were allowed to hold equity in Indian carriers. For instance, Gulf Air directly held about 20% equity in Jet Airways. The policy was subsequently discontinued and Gulf Air had to sell its stake back to Jet. Singapore Airlines and the Tatas, arguably the most serious contenders for taking over Air India, also could not make much headway because of the opposition from certain sections of the industry. After that came the 9/11 attacks. Its impact on global carriers virtually canned any talks of their possible investments into Indian aviation. However, things are looking good for the aviation industry now. Given a chance, they would like to look at the Indian market — considered to be one of the fastest growing markets in the world. Richard Branson’s Virgin would be the happiest if foreign airlines are allowed to invest in India. It was said to be negotiating with some Indian carriers including Air Deccan. But the talks couldn’t make headway because of restrictions on foreign carriers investing in Indian carriers. It could also be good news for Air Sahara as well.

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