New Delhi: Despite the government raising the FDI limit in the Indian domestic airlines to 100 per cent, the FDI limit for foreign airlines to invest in Indian carriers remains capped at 49 per cent.
However, experts point out that a foreign airline can join hands with its sovereign fund or non-aviation foreign private investors and set up a “100 per cent foreign-owned airline in India”.
Even though non-aviation foreign investors can invest up to 100 per cent in Indian carriers, this transaction has to be cleared by the government as only 49 per cent FDI will be permitted through the “automatic route” while anything beyond it will need “government approval”.
This means any such proposal will be examined by the government on a case-by-case basis. Nevertheless, the government’s FDI aviation announcement is being seen as an attempt to draw more foreign funds into the cash-strapped Indian aviation sector.
Top civil aviation ministry sources did not specify why the cap of 49 per cent FDI was not removed in the case of foreign airlines wanting to invest in Indian carriers.
However, it appears that the government is moving cautiously for strategic reasons since aviation is considered a sensitive sector and also perhaps to protect the Indian domestic airline industry from a complete and possibly danegerous takeover by foreign carriers. In 2012, the UPA government had permitted 49 per cent FDI in domestic airlines by foreign carriers. The move paved the way for setting up of two new airlines — Vistara and AirAsia India and investment by Abu Dhabi-based Etihad in Jet Airways.
