There will be no automatic approval for foreign airlines wanting to invest in a domestic carrier. The proposal will have to be cleared by the inter-ministerial Foreign Investment Promotion Board (FIPB).
Official sources told Business Line that this is being done to allay fears in sections of Government. “The FIPB will look at the sources of money, whether there is any security issue that needs to be considered and also address any other worries that different departments of the Government may have about investment coming from a particular country or company,” a senior Government official said.
Earlier this week, after a meeting with the Finance Minister, Mr Pranab Mukherjee, the newly appointed Civil Aviation Minister, Mr Ajit Singh, announced that there was “broad consensus” in the Government to allow foreign airlines to acquire a stake of up to 49 per cent in a domestic carrier. Currently, foreign airlines are not allowed to have a direct or indirect stake in an Indian carrier.
Lending from banks
The change in thinking comes in the back drop of Indian banks telling the Government that they are no longer comfortable about lending more money to Indian carriers.
“Indian banks have indicated that their comfort level on lending to an Indian carrier will increase if foreign airlines or institutions which are already in the aviation sector come in,” sources said.
Meanwhile, even before the Government formally notifies the change in policy, a number of inquiries have started flowing in from China.
This, despite several global full service airlines including Lufthansa, Emirates and Singapore Airlines indicating they are not looking at picking up stake in an Indian carrier.
The Kuala Lumpur-based Air Asia has said that it will examine all options including setting up a subsidiary airline in India, rather than look at investing in an Indian carrier.