The government is planning a budget announcement to hike the FDI ( Foreign Direct Investment) limit in the aviation sector to 100%, currently, the FDI limit in the aviation sector in India is 49%.
The reason behind 100% FDI is to attract international bids for Air India, slated for sale this financial year.
The current aviation FDI cap was not enough attractive enough and an increase in FDI will surly help troubled airlines, like Jet Airways & Air India to find buyers, sources said.
The SOEC (Substantial Ownership and Effective Control) clause bar any foreign investor from taking complete control of an airline, run by a board that has two-third members as Indians.
Finance Minister Nirmala Sitharaman said in the last budget speech in July, That the government proposed to hike the FDI limit in domestic air carriers from 49%.
“The government will examine suggestions of further opening up of the aviation, media (animation, AVGC) and insurance sectors in consultation with stakeholders,” she had said.
In the aviation sector, the 100% FDI is allowed under automatic route for MRO (maintenance, repair, overhaul), ground handling and aircraft purchase.
“In the airline operation, there is an issue of substantial ownership and effective control. Thus, the Civil Aviation Ministry will have to see all these to sell Air India, which would require liberalizing FDI in the sector,” said an official.
“The 100% FDI will have a better effect on the Air India bidding prospects. The Civil Aviation Ministry is in the loop,” said sources.
Jet Airways had been grounded since 18 April due to an acute fund crunch.
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