India’s Cabinet Committee on Economic Affairs approved (14-Sep-2012) the proposal of the Department of Industrial Policy and Promotion for permitting foreign airlines to make foreign investment, up to 49% in scheduled and non-scheduled air transport services. Removing the existing restriction on investment by foreign airlines “would assist in bringing in strategic investors into the civil aviation sector,” the Committee noted, adding, “Higher foreign investment inflows are necessary at the present juncture, in order to strengthen the sector. Introduction of global best practices, concomitant with the induction of FDI from foreign airlines, is expected to lead to higher service standards, international best practices and induction of state-of-the-art technologies, in the air transport sector”. Foreign direct investment (FDI) under the new proposal would have the following conditions:
- A Scheduled Operator’s Permit can be granted only to a company that is registered and has its principal place of business within India, the chairman and at least two-thirds of the directors of which are citizens of India, and the substantial ownership and effective control of which is vested in Indian nationals;
- All foreign nationals likely to be associated with Indian air transport services, as a result of such investment, shall be cleared from security view point before deployment;
- All technical equipment that might be imported into India, as a result of such investment, shall require clearance from the relevant authority in the Ministry of Civil Aviation. [more - original PR] [more - CAPA Analysis]
India Government: “The issue of permitting FDI by foreign airlines in the equity of an air transport undertaking operating Scheduled and Non-Scheduled air transport services has been under consideration of Government for some time. There has been a need to consider financing options available for private airlines in the country, for their operations and service upgradation, and to enable them to compete with other global carriers. Denial of access to foreign capital could result in the collapse of many of our domestic airlines, creating a systemic risk for financial institutions, and a vital gap in the country’s infrastructure,” Cabinet Committee on Economic Affairs. Source: Company Statement, 14-Sep-2012.