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Following the 2012 decision to allow foreign investment of up to 49% in airlines, Etihad Airways bought a 24% equity stake in Jet Airways. Photo: Abhijit Bhatlekar/Mint
Following the 2012 decision to allow foreign investment of up to 49% in airlines, Etihad Airways bought a 24% equity stake in Jet Airways. Photo: Abhijit Bhatlekar/Mint

Govt shelves proposal to raise FDI limit in civil aviation to 74%

Foreign airlines are currently allowed to own as much as 49% in an Indian airline

New Delhi: The aviation ministry has decided to shelve a proposal to raise the foreign investment limit in Indian airlines to 74%.

Foreign airlines are currently allowed to own as much as 49% in a local airline. The proposal to raise the foreign investment limit was part of the draft civil aviation policy, which is awaiting cabinet approval.

The aviation policy was sent to the Union cabinet for its approval on Friday. In it, the only point that was missing from the draft aviation policy sent earlier was the deletion of the proposal to raise the foreign investment limit by 2020.

“We had proposed we should go to—if possible—74% by 2020," civil aviation secretary Rajiv Nayan Choubey said in an interview on Thursday.

“The idea was to alert the industry that further liberalization four to five years down the line is possible. So the industry then has to gear up. You have to give sufficient time to them. But based on our feedback and everything we decided we don’t have to say so specifically. If the government wishes to revise its FDI (foreign direct investment) policy it can do it anytime. There is no reason to put the sector on notice," said Choubey, who will soon complete a year in the aviation ministry and has been pushing for an integrated aviation policy.

The 2012 decision to allow foreign investment of up to 49% in airlines saw the Tata group launching Tata SIA Airlines Ltd with Singapore Airlines Ltd and low-cost airline AirAsia India along with Malaysia’s AirAsia Bhd. Etihad Airways also bought a 24% equity stake in Jet Airways (India) Ltd.

The aviation ministry is confident that all the other 22 points made in the policy will be cleared by the cabinet.

These include proposals for new airlines to fly international routes before completing five years, regional connectivity and bilateral international rights.

The policy has long been in the making due to extensive stakeholder consultations. The airline industry has also been divided over many proposals. Old airlines don’t want relaxations that help newcomers while new airlines claim there is room for everyone to grow.

“We have successfully taken all the matters smoothly and we have taken it to the cabinet now. It has been officially sent to cabinet. Now it’s for the cabinet to take a call when they wish to take it up. The policy was moved to the cabinet on Friday night," Choubey said. “It’s a very extensive work that we have done."

The draft policy also drew objections from the ministries of foreign, home and finance and had to be ironed out in the last few weeks, according to another senior government official who declined to be named.

Choubey declined to comment on the specifics, saying, “When you try to build consensus in certain aspects you decide to go for consensus, in certain items you decide okay this is something I can accept and this is something I cannot accept. In stakeholders consultations, we have accepted some, others we have not been able to accept."

Choubey indicated the contours of the draft policy won’t change much.

“The issues are the same. I would not say there will be earth-shaking revelations because these things were there in the draft policy also," he said, adding that on each of the 22 points, the ministry has given its “unequivocal" opinion of what it is seeking and why.

The aviation secretary said he is hopeful the policy won’t be delayed any further or be referred to a group of ministers for consultations.

“We have done such extensive due diligence that I don’t expect it to become a googly," he said, adding, “Normally these things don’t get delayed."

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