NEW DELHI: The Central government, which is expected to invite Expressions of Interest for Air India next month, is considering relaxing of Foreign Direct Investment (FDI) norms in the aviation sector to attract global bidders.The Department for Promotion of Industry and Internal Trade (DPIIT) and civil aviation ministry are expected to discuss relaxation of FDI limit from the current 49 per cent to majority stake-holding by foreign stakeholders.
In the Budget speech, Union Finance Minister Nirmala Sitharaman had proposed relaxation in FDI norms for certain sectors including aviation. The announcements were then seen as a bid to attract prospective buyers for Air India, since the 49 per cent limit on FDI has been a big block for foreign portfolio investors (FPI) investing in the debt-laden airline. The government is also looking to do away with other terms and conditions that evoked a lukewarm response when AI was first put on sale last year.
According to officials, there were several proposals including one for giving majority stake to FDI as well as others where FPIs can invest a further percentage beyond 49 per cent, to give foreign shareholders a majority stake.In the aviation sector, 100 per cent FDI is allowed under automatic route for MRO (Maintenance, Repair, Overhaul), ground handling and aircraft purchase, but not for control of airlines.
Air India has a total debt of around `58,000 crore, besides huge accumulated losses running into thousands of crores of rupees. This is likely to be pared to make the Maharaja more attractive. Currently, it is surviving on a `30,000-crore government bailout. Its financial woes has peaked to such an extent that oil marketing companies have threatened to cut oil supplies.
The inter-ministerial group, which will have officials from ministries such as defence, information and broadcasting, electronics and IT, and finance, would also discuss the possibility of further simplifying and easing FDI policy to attract overseas investors.