Centre allows 100 per cent FDI in airlines, 49 per cent cap for foreign carriers stays

The changes to investment policy in aviation sector come less than a week after the Union Cabinet approved the National Civil Aviation Policy 2016, which had maintained a status quo on the FDI regime in the sector.

By: ENS Economic Bureau | New Delhi | Updated: June 21, 2016 3:14:29 pm
indian aviation, indian aviation safety status, indian aviation saftey standrad, aviation safety ranking, Indian flights, civil aviation, Directorate General of Civil Aviation, DGCA, Indian express, business news At present foreign firms need govt approval to raise equity stake in airport projects from 74% to 100%.

The government on Monday raised foreign direct investment (FDI ) limit in scheduled commercial airlines to 100 per cent from 49 per cent. Foreign airlines, though, are barred from holding equity stake in Indian carriers above 49 per cent. As per changes in the FDI policy announced by the Prime Minister’s Office, foreign investors can pick up 100 per cent FDI in existing airports under the ‘automatic route’ — a change from present regime where foreigners needed government approval if they wanted to raise equity stake in airport projects from 74 per cent to 100 per cent.

“As per the present FDI policy, foreign investment up to 49 per cent is allowed under automatic route in scheduled air transport service/domestic scheduled passenger airline and regional air transport service. It has now been decided to raise this limit to 100 per cent, with FDI up to 49 per cent permitted under automatic route and FDI beyond 49 per cent through government approval,” the PMO said in a statement.

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For non-resident Indians, 100 per cent FDI will continue to be allowed under automatic route in scheduled airlines.

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The changes to investment policy in aviation sector come less than a week after the Union Cabinet approved the National Civil Aviation Policy 2016, which had maintained a status quo on the FDI regime in the sector. In the draft aviation policy released in October last year, the ministry proposed raising the FDI limit for airlines to 50 per cent from 49 per cent.

The government said FDI policy for airports is being relaxed to aid their modernisation. “With a view to aid in modernisation of the existing airports to establish a high standard and help ease the pressure on the existing airports, it has been decided to permit 100 per cent FDI under automatic route in brownfield airport projects,” the PMO said.

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India already had a very liberal foreign investment regime in the civil aviation sector, as barring the case of scheduled commercial airlines, FDI was allowed up to 100 per cent in most other areas. Besides airports, the government allows 100 per cent FDI for non-scheduled air transport services and helicopter/seaplane services. For maintenance and repair organisations as well as ground handling services too 100 per cent FDI is permitted.

The UPA government had permitted 49 per cent FDI in domestic airlines by foreign carriers in 2012, which paved the way for setting up of two new airlines — Vistara and AirAsia India — and investment by Etihad Airways in Jet Airways. The announcement also comes against the backdrop of persisting concerns over ownership and control at local carriers where foreign players have a substantial stake.

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