NEW DELHI: The Union government will look at increasing Foreign Direct Investment (FDI) limit in airlines, a move that was earlier bitterly resisted by many Indian carriers including the now-defunct Jet Airways.
Finance Minister Nirmala Sitharaman, in a select interaction with the media, said that the government “can think of a bit more than 49 per cent” FDI in civil aviation. However, she indicated that this would be a decision taken together with her colleagues.
On Friday, presenting the budget, the minister had said that “the government will examine suggestions of further opening up of FDI in aviation, media and insurance sectors in consultation with all stakeholders.”
Currently though, FDI of up to 100 per cent is allowed in airlines; this is subject to government approval on a case-to-case basis. Under the automatic route, where permissions need not be sought for investment, FDI in scheduled airlines and regional air transport services is limited to 49 per cent.
For long, many Indian airlines resisted opening up of the sector to FDI, stalling many plans for foreign carriers to fly into India with or without Indian partners, including an early Tata proposal in the 1990s.
However, if the proposal to raise FDI cap goes through, it might help sell not only Air India and the rump portion of Jet Airways, but also other Indian airlines that have been going through a rough patch.
Earlier too, many foreign airlines had shown interest in entering the Indian market by setting up a subsidiary, but have been deterred by local rules.
Sitharaman is also looking at India entering aircraft financing and leasing activities from Indian shores.
Till now, India’s airlines have for long rented aircraft from abroad, paying hard dollars in rentals that with every currency fluctuation added to their financial woes.