FDI Proposal for the Airline Industry Now on Hold
Aug. 26 – A proposal made by the civil aviation ministry that would have allowed foreign carriers to buy a 25 percent stake in India’s local carriers have been put on hold due to security concerns.
The proposal was made to give local carriers access to foreign funding after severe losses in the industry. Currently, foreign carriers are not allowed to directly or indirectly hold equity in local airlines although other foreign investors are allowed to own up to 49 percent in Indian carriers.
Moreover, foreign direct investment from helicopter operators and ground-handling companies in local companies are allowed. “Because of the turmoil in the aviation sector, an early decision on allowing foreign carriers to invest in domestic airlines is not expected. There are various pros and cons of the decision and they have to be taken into account before taking a call,” a senior civil aviation ministry official told The Economic Times.
He added: “For certain reasons, the airline industry is considered a sensitive sector and any decision has to be taken with security in mind.” The domestic airline industry has struggled for the past year because of weak demand, high fuel prices and irrational pricing.
According to The Economic Times, Kingfisher Airlines chairman Vijay Mallya has been lobbying for foreign carriers to invest in local airlines while India’s although Jet Airways has been against the move.
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