Foreign airlines may get to control domestic airlines, both scheduled and non-scheduled ones, if the Arvind Mayaram committee’s suggestions are accepted.
The Government-appointed panel has also recommended 100 per cent foreign direct investment (FDI) in existing airport projects without the need for any approval.
Once these recommendations see the light of the day, airlines such as Jet, Indigo, SpiceJet and GoAir, and airports such as Delhi, Mumbai, Hyderabad and Bangalore could be impacted.
The Mayaram panel has also suggested that foreigners should be allowed to run a non-scheduled airline even if it has just one aircraft operating on domestic routes. A scheduled airline is one operating with a minimum of five aircraft on the basis of its schedule and fares filed with the aviation regulator.
However, there is no such stipulation for non-scheduled airlines.
“Scheduled domestic airlines, where a degree of Indian oversight or participation is considered essential, should be made eligible for 74 per cent foreign investment from the existing 49 per cent. This limit would be a combination of FDI and foreign institutional investment,” a senior Government official said.
Foreign investment up to 49 per cent can take the automatic route, while the Foreign Investment Promotion Board’s (FIPB) approval should be taken only if the proposal is for up to 74 per cent investment, he said.
According to the official, the 74 per cent cap will ensure Indian ownership of at least 26 per cent. “This, as per the Companies Act, will make it possible to block any special resolution of the board,” he said. A 74 per cent limit has been suggested keeping in mind the nascent domestic aviation industry’s requirement for financial and economic security.
But, increasing the foreign investment limit to 74 per cent in domestic scheduled airlines will need an amendment in the provision of Civil Aviation Requirement which prescribes stipulation of “substantial Indian ownership and effective control”.
However, the amendment should not be a problem if the basic principle is accepted at the inter-Ministerial level and then at the Cabinet level, the official said.
On non-scheduled air transport services and existing airport projects, the panel has pitched for 100 per cent limit under the automatic route.
“These (services and projects) are akin to infrastructure,” the official said. At present, 74 per cent FDI and 100 per cent non-resident Indian investment is permitted in non-scheduled air transport services.
In all, 49 per cent investment is permissible under the automatic route and FIPB approval is needed for investment above this limit.
At present, 100 per cent investment is allowed in existing airport projects on the condition that up to 74 per cent of it comes through the automatic route, while the Government route is required for any proposal that entails over 74 per cent investment.
These suggestions, along with proposals for various other sectors, will be discussed in a two-day meeting between the Department of Industrial Policy and Promotion with various Ministries from July 1.
shishir.sinha@thehindu.co.in