India hikes foreign equity cap for aviation

Wednesday, 20 October 2004, 07:00 Hrs
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NEW DELHI: The Indian government Wednesday cleared a proposal to hike foreign investment limit in the domestic civil aviation sector to 49 percent from the existing cap of 40 percent.

Foreign airlines, however, cannot invest in the domestic airlines.

The decision was taken at a meeting of the Cabinet Committee on Economic Affairs chaired by Prime Minister Manmohan Singh here and attended among others by Civil Aviation Minister Praful Patel and Finance Minister P. Chidambaram.

"The proposal has been approved, the hike in foreign investment cap for domestic airlines," Textiles Minister Shankar Sinh Vaghela told reporters after the meeting.

The cabinet panel took note of the fact that there was an urgent need to infuse more foreign capital into the aviation sector to make the domestic aviation industry more efficient and competitive, official sources said.

The finance minister had proposed to hike foreign investment limit in insurance, telecommunication and civil aviation sectors while delivering his budget speech in parliament July 8.

In insurance, Chidambaram had proposed to revise the cap to 49 percent from 26 percent, while in telecommunication he called for the limit to be enhanced to 74 percent from 49 percent.

"There is an urgent need for infusing huge amounts of capital in these sectors," Chidambaram had said, adding it was in tune with the government's National Common Minimum Programme to actively seek foreign investment in infrastructure.

But a decision was not notified since Left parties, which are extending outside support to the United Progressive Alliance government, raised objections.

Subsequently, the Left parties relented after the government made a strong pitch for foreign funds, saying it was necessary in order to improver the country's infrastructure and achieve the targeted growth of eight percent.

"My initial reaction is that since the decision involves only domestic airlines getting some more foreign funds, we see no problem," said D. Raja, deputy leader of the Communist Party of India.

Source: IANS
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