A proposal to increase the foreign direct investment (FDI) limit in the civil aviation sector is unlikely to find favour with sections in the Government.
On Wednesday, the Arvind Mayaram Committee recommended that FDI limit may be raised for joint ventures in defence, broadcasting, telecom, private banks and aviation. Mayaram is Secretary Economic Affairs and heads the Foreign Investment Promotion Board, the nodal agency to attract foreign investments into the country.
While the Committee has suggested hiking the FDI limit in civil aviation, there is no clarity on which sector in civil aviation is to be considered under the proposal.
Civil aviation has a number of sectors including ground handling, domestic airlines, Non-Scheduled Operators Permit (NSOP) and setting up new airports. Each of these sectors has different FDI limits.
For example, in ground handling FDI up to 74 per cent is allowed, while a foreign airline has now been allowed to pick up equity up to 49 per cent in a domestic airline.
Officials from a cross section of Ministries connected with the proposal, like Commerce, Finance and Civil Aviation, say a clearer picture is likely to emerge by next week when the ministries send in their comments on the proposal to the Finance Ministry.
The fact that the FDI limit in ground handling is already 74 per cent and only recently foreign airlines have been given permission to hike their equity holdings in domestic airlines, have led to the lack of clarity on the issue. With regard to increasing the FDI limit to 100 per cent in the NSOP category, analysts point out that if the intention of opening up the sector is to get more flow of foreign funds into India then NSOP is the wrong category to look at as the amount the Government will be able to attract will be very small.
The NSOP category has almost 150 players who import aircraft or helicopters which are then given on charter. A majority of the players in the sector have less than five machines each with the exceptions being state-owned helicopter operator, Pawan Hans Helicopters Ltd and Global Vectra.
But there are others in the Government who feel that it is important to consider the recommendations of the Mayaram committee report to send a signal to the global financial and business community so as to get more foreign currency inflows, stop the depreciation of the rupee and prevent any possible downgrade of the country’s sovereign rating.
ashwini.phadnis@thehindu.co.in