Government may up FDI in aviation to 74%

The government is considering a proposal to raise the foreign investment cap in domestic carriers from 49 per cent to 74 per cent. This has been necessitated following the failure of the existing regime to bring in substantial foreign direct investment in the sector. The government is of the view that a more investment friendly system is required to help carriers raise funds for their expansion plans. Moreover, fund inflow will also help carriers tide over their financial woes. It is expected that Indian carriers will acquire close to 400 aircraft — valued at over $15 billion — over the next few years as a part of their expansion plans. But, most such plans hinge on their capacity to raise funds.

However, foreign airlines looking to invest in India’s aviation sector still have to wait — the ban on their investing in domestic carriers will continue. Even foreign equity funds in which airline companies have a stake are barred. On the other hand, the restrictions on the composition of an airline’s board are expected to be relaxed. The present policy restricts the number of foreign members of an airline board to a third of its total size. It also prevents a foreign national from being the chairman of the board. The restrictions were put in place to ensure that control over airlines stayed in the hands of Indian nationals. The proposed civil aviation policy is expected to detail such changes. “We are trying to reach a broad consensus on the issue. Stakeholders will be consulted before a final decision is taken,” said a senior civil aviation ministry official.

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