Serious differences have cropped up between the Finance Ministry-headed Foreign Investment Promotion Board and the Ministry of Civil Aviation on the decision to give the nod to a three-way joint venture between the Malaysia-based AirAsia, Tata Sons and Telestra Trading to set up a domestic airline in India.
Twenty days after the proposal was taken up by the inter-ministerial Foreign Investment Promotion Board (FIPB), the Finance Ministry issued a press release saying that the proposal was one of the six foreign investment proposals that had been approved.
The new airline’s proposal involves a foreign direct investment inflow of about Rs 81 crore.
However, speaking to newspersons Minister for Civil Aviation Ajit Singh said that there were still procedural problems facing the AirAsia proposal. The Minister did not give any specifics but said that his Ministry will support the proposal.
Senior officials of the Civil Aviation Ministry claimed that they were yet to receive clarifications on the category under which the proposal was cleared.
The root of the problem is the difference in the interpretation of rule 3.2.1. of the guidelines for foreign direct investment in the civil aviation sector which states “foreign airlines are also, henceforth allowed to invest, in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent.”
The Ministry of Civil Aviation is interpreting operating to mean an existing airline, a point which is disputed by the FIPB. Incidentally, this was also a point that was raised by the Ministry of Civil Aviation when AirAsia’s proposal was first taken up by FIPB on March 6.
“Allowing FDI only in existing airlines is a flawed policy. It should also be allowed in start-ups which also need to be well capitalised with strategic partners. It will be good if the Department of Industrial Promotion and Policy issues clarifications to put this matter to rest,” Kapil Kaul, Chief Executive Officer, Centre for Asia Pacific Aviation said.
AirAsia will now have to wait for a formal letter from FIPB after which it will approach the Domestic Transport Department in the Ministry of Civil Aviation which will check if the proposal meets sectoral guidelines.
Before starting operations the airline will also have to get clearances for import of aircraft and get its operating manual from the Directorate General of Civil Aviation.
According to its promoter Tony Fernandes, AirAsia plans to start operations from the fourth quarter this year.
ashwini.phadnis@thehindu.co.in