49% to foreign carriers: Home,FinMin on board

With the finance ministry on board,the proposed move to allow foreign carriers to pick 49 per cent stake in domestic airlines may soon get Cabinet nod.

Written by Smita Aggarwal | New Delhi | Published: April 6, 2012 1:00:21 am

With the finance ministry on board,the proposed move to allow foreign carriers to pick 49 per cent stake in domestic airlines may soon get Cabinet nod. The move is one of the measures that will help the troubled sector out of the current financial distress and enable domestic carriers including Kingfisher Airlines find investors to keep the itself afloat.

“We are on board with the proposal. It is up to the civil aviation ministry to take it forward now,” a finance ministry official said. Another official from the civil aviation ministry said his ministry has already given its nod to the Department of Industrial Policy and Promotion (DIPP),the nodal ministry for taking the proposal to the Cabinet.

“It should come up for the Cabinet’s consideration soon,” the official told The Indian Express. Officials in the DIPP said that the department had undertaken an analyses of foreign investment norms in other countries. “We have to put up a credible argument now since it is a significant change from our earlier Cabinet note that had proposed 26 per cent investment by foreign airlines. Though the civil aviation and finance ministries have in principle favoured 49 per cent foreign airlines’ investment,we have to float a fresh Cabinet note,” a DIPP official said.

Commerce and Industry Minister Anand Sharma today said a decision on FDI in civil aviation was likely soon. “This has been discussed with the Finance Minister,the Civil Aviation Minister and myself and an appropriate view and decision will be taken very soon,” he said on the sidelines of a summit in New Delhi.

A group of officers comprising officials from finance ministry,Sebi,DIPP besides the civil aviation ministry met recently to iron out the two major sticking points. One related to waiver of a provision in Sebi’s new Takeover Code which mandated that the investor picking up more than 25 per cent equity has to make an open offer in the market.

“We have put out a solution for companies to tackle the Takeover Code to meet the FDI cap of 49 per cent in certain sectors like aviation. Accordingly,foreign investors who wish to buy stakes in listed companies in areas where FDI is capped at 49 per cent or lower will be asked to first go for an open offer and buy shares from the public. After that,they can purchase additional shares from promoters,” said a finance ministry official.

On security concerns,the official said that the home ministry has worked out a solution. “The home ministry has said it will put in place provisions to bar hostile takeovers from vested interests. The management of the airline can’t be allowed to go to a foreigner but has to be vested with an Indian,” he said.

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