Cabinet to discuss hot, old issue again: FDI in aviation

The other areas that could see a hike in the FDI caps include airport infrastructure, PSU refineries, petroleum products, oil exploration in small and medium oil fields, natural gas and LNG sectors and companies in the field of basic and cellular telephony.

The N K Singh Committee had recommended raising of sectoral caps in FDI in some of these sectors in its report in last September. The Cabinet considers the proposals after they have been vetted by the Group of Ministers headed by Finance Minister Jaswant Singh.

It was at a meeting in late February that the GoM took up the ticklish issue of raising the FDI limits for the domestic airlines. After a few postponements sought by the Civil Aviation ministry, the meeting took place without the minister, Shahnawaz Hussain. A senior minister stated that ‘‘McDonald’s and Pepsico could not be expected to invest in airlines’’ and that any serious effort to open up the sector meant foreign airlines would have to be allowed. The GoM decided to go ahead with the proposal. With a stand taken, the Cabinet’s stamp could now be a formality.

Among the other proposals is to allow 100 per cent FDI in the petroleum sector including PSU oil refineries, petro products, oil exploration in small and medium oil fields, natural gas and LNG. These clearances will, however, have to go through the FIPB route for clearances and will be subject to sectoral policy guidelines.

For the telecom sector, it is proposed that FDI limits for basic and cellphone companies be raised from the existing 49 per cent to 74 per cent. This is subject to ‘‘no foreign equity participation under the domestic vehicle route and also subject to compliance of security requirements.’’

When the telecom sector opened up in 1995, several foreign companies had made a beeline for India but most of them have walked out for one reason or another. These include Nynex, Telstra, Swiss PTT, US West, British Telecom, Malaysia Telecom, Bell Canada and Bell South. The three large foreign investors left in the fray are Hutchison Whampoa, AT&T and Singapore Telecom.

The proposals also include allowing 100-per cent FDI in Internet, e-mail and voice-mail companies. While there is no hike proposed for radio paging companies, the retailing cap on these companies are set to go.

The cabinet will also consider raising the FDI limits in airport infrastructure from 74 per cent to 100 per cent. The move is in line with the N K Singh Committee’s suggestions that this was a must for the upgradation of Indian airports as per international standards.

There is also a proposal to raise the FDI limits in scientific and technical journals from 74 per cent to 100 per cent.