Govt reverses UPA decision to keep AI out of FDI policy

New Delhi: The NDA government’s move to allow FDI by foreign airlines in debt-ridden national carrier Air India upto 49 per cent is a reversal of the previous UPA-2 government’s decision to keep Air India out of the FDI policy.

The move is also an indicator that the government is serious about disinvestment in the loss-making cash-strapped national carrier so as to bring about fresh infusion of funds.

However, the government has made it clear that the critical “substantial ownership and effective control (SOEC) of Air India” remains in Indian hands.

The government had announced last year that there would be disinvestment in Air India but the extent of it is yet to be decided. It had constituted an inter-ministerial group to chalk out the strategy in this regard.

The government owns 100 per cent stake in Air India currently.

On Wednesday, civil aviation Minster Ashok Gajapathi Raju reportedly said that permitting 49 per cent foreign direct investment in Air India brings the airline at par with other domestic carriers and does away with the preferential treatment that was extended to the national carrier.

On Wednesday, the government stated, “As per the extant policy, foreign airlines are allowed to invest under government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent of their paid-up capital. However, this provision was presently not applicable to Air India, thereby implying that foreign airlines could not invest in Air India. It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49 per cent under approval route in Air India subject to the conditions that: Foreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49% either directly or indirectly Substantial ownership and effective control of Air India shall continue to be vested in Indian National(s),” the government stated on Wednesday.

On whether the move will attract foreign bidders for Air India’s disinvestment, Mr. Raju said, “We would like them to come and participate,” adding, “Ultimately, the public sector is not supposed to become a financial drain for the tax payer. Air India’s woes are basically financial. Basically it is that. So, lets see where it takes us.”