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Centre mulls diluting FDI rules ahead of Air India sell-off

Centre mulls diluting FDI rules ahead of Air India sell-off

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  4 Dec 2019 11:54 AM GMT

New Delhi: Seeking to ensure aviation biggies’ participate in the bidding for Air India sale, the government may dilute substantial ownership and effective control (SOEC) clause in the FDI guidelines for the airline sector.

Official sources said the Department for Promotion of Industry and Internal Trade (DPIIT) has been discussing the proposal with the administrative Civil Aviation Ministry.

The present FDI rules allow up to 100 percent FDI in domestic carriers but the investment by a foreign airline is capped at 49 percent. Further, substantial ownership and effective control have to be in the hands of Indians.

In most of the aviation-related activities such as ground-handling, greenfield airports, and Maintenance, Repair, Overhaul (MRO), FDI is allowed up to 100 percent through automatic route.

Relaxation in FDI rules for airlines may help generate interest among foreign players keen to get a foothold in the Indian market.

As the government’s bid to sell a majority 76 percent stake in Air India failed last year with not a single private firm showing interest, the dilution in FDI norms could encourage foreign airlines and other investors to participate in the bidding this time.

“We would make sure that the disinvestment of Air India happens this time. All the necessary steps would be taken. The issue of relaxing FDI guidelines has been there. We are examining it,” said a government official wishing not to be named.

The government is making an all-out attempt to completely exit Air India. Finance Minister Nirmala Sithraman has set March 31, 2020, as the deadline for Air India disinvestment.

Civil Aviation Minister Hardeep Singh Puri last week said that Air India would be shut down if the disinvestment bid fails this time, hinting the government would go the extra mile to sell the debt-laden carrier. Air India has sucked nearly Rs 30,000 crore of taxpayers’ money since April 2012 but has failed to improve either on operational or financial parameters. The airline’s on-time performance across four metros of Delhi, Mumbai, Hyderabad, and Bangalore was 54.3 percent in October. (IANS)

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