In a major development, the union government has eased foreign direct investment (FDI) norms in civil aviation sector. The government has raised FDI limit in scheduled commercial airlines from 49 per cent to 100 per cent. According to the amendment announced by the PMO, the extant FDI policy on airports permits 100 per cent FDI under automatic route in greenfield projects and 74 per cent FDI in brownfield projects. FDI beyond 74 per cent for brownfield projects is under government route.
The PMO, in its statement, stated that the decision was taken with the objective of providing major impetus to employment and job creation in India.
As per the present policy, FDI up to 49 per cent is allowed under automatic route in scheduled commercial airlines. It has now been decided to raise this limit to 100 per cent, with FDI up to 49 per cent permitted under automatic route and beyond that through government approval. For NRIs, 100 per cent FDI will continue to be allowed under automatic route. However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled services up to the limit of 49 per cent of their paid up capital and subject to the laid down conditions in the existing policy.
“Allowing up to 100 per cent FDI in schedule airlines and regional carriers subject to government approval, is positive, as this would pave the way for fund raising for domestic airlines, which can go a long way in reducing debt levels and improving the balance sheet structure. The foreign airlines however can pick up only up to 49 per cent equity stake in Indian carriers,” commented Subrata Ray, senior vice president; co-head, corporate sector ratings, ICRA.
