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DIPP favours foreign airlines’ investment in domestic carriers

The Department of Industrial Policy and Promotion (DIPP) has repeatedly written letters to the aviation ministry raising the issue,a senior government official said.

The ministry of commerce and industry has supported a proposal to allow foreign airlines to invest in the domestic aviation sector,a long-standing demand of the cash-strapped domestic carriers that need infusion of fresh equity to stay afloat.

The Department of Industrial Policy and Promotion (DIPP) has repeatedly written letters to the aviation ministry raising the issue,a senior government official said.

The official said that the aviation ministry is considering the proposal to allow foreign airlines to invest in Indian carriers.

So far,FDI up to 49 per cent is allowed in domestic airlines or 100 per cent for investments by non-resident Indians,but the policy bars foreign airlines from investing,primarily on security grounds. “The Indian aviation industry is in a crisis. If they get equity from foreign players,we should not come in the way,” the official said. However,when contacted,civil aviation minister Vayalar Ravi said,“Nothing has moved so far. It is a policy decision. The matter will go to the Cabinet.” He said that though a series of meetings have been held within the ministry,the meeting with airlines is yet to take place over the issue. The domestic industry is,though,divided on the issue. While major airlines like Jet Airways have raised a red flag over the issue apprehending hostile takeovers,given the financial difficulties they face,Vijay Mallya-promoted Kingfisher Airlines has openly supported the proposal.

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There is also a fear that foreign carriers can resort to predatory pricing that is,artificially lowering the price in order to kill competition. Currently,the sector can receive up to 100 per cent investment from non-resident Indians. Globally,foreign airlines are permitted to invest 20-25 per cent equity in domestic carriers owing to security reasons.

First published on: 22-09-2011 at 01:22:26 am
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