The government has allowed foreign airlines to own up to 49 per cent stake in national carrier Air India at a time when the process for strategic disinvestment of the debt-laden airline is on. The move would pave the way for Indian players such as Tatas to join hands with foreign entities in bidding for Air India. While allowing foreign investors, including overseas airlines, to have stake in Air India, the government has also made it clear that the national carrier’s substantial ownership and effective control would remain with an Indian national.
A group of ministers is in the process of finalising the contours for the proposed strategic stake sale in the national carrier and expression of interest is likely to be invited from bidders soon. The Cabinet, chaired by Prime Minister Narendra Modi, gave its approval to a number of amendments in the FDI policy, including those pertaining to Air India.
Now, foreign airlines have been allowed to have up to 49 per cent stake under the approval route in Air India subject to certain conditions, an official release said. Foreign airlines were allowed to invest under government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent of their paid-up capital. The provision was not applicable to Air India.
“It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49 per cent under approval route in Air India,” the release said. Foreign investments in Air India, including that of overseas airlines, should not exceed 49 per cent either directly or indirectly. “Substantial ownership and effective control of Air India shall continue to be vested in Indian national,” the release said.
Civil aviation minister Ashok Gajapathi Raju said that permitting 49 per cent foreign direct investment in Air India brings the airline at par with other domestic carriers and does away with the preferential treatment that was extended to the national carrier.
While there have been reports suggesting that Tatas and Singapore Airlines might jointly bid for Air India, there has been no official word from the government or the carriers concerned. Singapore Airlines said it will keep options open on Air India disinvestment.
The International Air Transport Association (IATA), a global grouping of airlines that includes Air India, said the amendment in the FDI policy is a step in the right direction. Aviation think tank CAPA welcomed the decision to allow foreign airlines to invest up to 49 per cent in Air India.
“Now Air India is on par with other Indian airline operators with respect to FDI norms. This was much needed in light of the proposed privatisation of Air India and should hopefully bolster the prospects of Air India’s privatisation,” said Jatin Aneja, partner and national practice head (project and project finance) at law firm Shardul Amarchand Mangaldas and Co.