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Govt mulls diluting FDI rules ahead of Air India sell-off
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SME Times News Bureau | 03 Dec, 2019
Seeking to ensure aviation biggies' participate in the bidding for Air
India sale, the government may dilute substantial ownership and
effective control (SOEC) clause in the FDI guidelines for the airline
sector.
Official sources said the Department for Promotion of
Industry and Internal Trade (DPIIT) has been discussing the proposal
with administrative Civil Aviation Ministry.
The present FDI
rules allow up to 100 per cent FDI in domestic carriers but the
investment by a foreign airline is capped at 49 per cent. Further,
substantial ownership and effective control has to be in the hands of
Indians.
In most of the aviation-related activities such as
ground-handling, greenfield airports and Maintenance, Repair, Overhaul
(MRO), FDI is allowed up to 100 per cent through automatic route.
Relaxation
in FDI rules for airlines may help generate interest among foreign
players keen to get a foothold in the Indian market.
As the
government's bid to sell majority 76 per cent stake in Air India failed
last year with not a single private firm showing interest, the dilution
in FDI norms could encourage foreign airlines and other investors to
participate in the bidding this time.
"We would make sure that
disinvestment of Air India happens this time. All necessary steps would
be taken. The issue of relaxing FDI guidelines has been there. We are
examining it," said a government official wishing not to be named.
The
government is making all-out attempt to completely exit Air India.
Finance Minister Nirmala Sithraman has set March 31, 2020 as the
deadline for Air India disinvestment.
Civil Aviation Minister
Hardeep Singh Puri last week said that Air India would be shut down if
the disinvestment bid fails this time, hinting the government would go
the extra mile to sell the debt-laden carrier.
Air India has
sucked nearly Rs 30,000 crore of taxpayers' money since April, 2012 but
has failed to improve either on operational or financial parameters. The
airline's on-time performance (OTP) across four metros of Delhi,
Mumbai, Hyderabad and Bangalore was 54.3 per cent in October.
The
government has been very liberal in opening various sectors for FDI and
is unlikely to hesitate on further relaxing the conditions for the
airline sector.
Presenting the Union Budget in July this year,
Finance Minister Nirmala Sitharaman had said the government would invite
suggestions for further opening up of FDI in the aviation, media,
animation AVGC and insurance sectors. Subsequently, the government eased
FDI rules in retail and media. Aviation may be the next on the
government's agenda.
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