The government’s intention in raising the FDI limit in scheduled domestic airlines to 100% via the approval route was not to let foreign airlines acquire Indian carriers, a senior official said on Wednesday. But the government may not issue a clarification in this regard despite many analysts finding an ambiguity in the latest policy announcement.
“The intention is to attract foreign funds for the sector. For the time being, we don’t want foreign airlines to have majority stake in domestic carriers. We have taken a calibrated approach to liberalise the sector.” civil aviation secretary Rajeev Nayan Choubey said. He added that if the government’s future experience suggests that foreign airlines be allowed to own domestic carriers, the current cap on their equity (49%) might be done away with.
After the recent changes in FDI policy — which allowed 100% FDI in the sector and retained the cap for FDI by foreign airlines at 49%, analysts felt that an opportunity was created for foreign carriers to acquire their Indian counterparts.
For instance, if Qatar Airways acquires a maximum possible stake of 49% in Spicejet and wants to partner with another foreign entity for the balance 51% stake, the government will conduct due diligence to ensure the latter is at arm’s length from Qatar Airways before being allowed to pick up a majority stake. Also, if a foreign investor wants to wholly own a domestic scheduled airline, its associations with foreign airline companies will be ascertained.
“The government, through an inter-ministerial committee, will examine the proposal of any foreign investor wanting to acquire more than 49% stake in a domestic carrier. Several factors would determine the government’s approval, including whether the entity indeed has an arm’s length distance from the foreign airline,” Choubey said.
23/06/16 Bilal Abdi/Financial Express
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“The intention is to attract foreign funds for the sector. For the time being, we don’t want foreign airlines to have majority stake in domestic carriers. We have taken a calibrated approach to liberalise the sector.” civil aviation secretary Rajeev Nayan Choubey said. He added that if the government’s future experience suggests that foreign airlines be allowed to own domestic carriers, the current cap on their equity (49%) might be done away with.
After the recent changes in FDI policy — which allowed 100% FDI in the sector and retained the cap for FDI by foreign airlines at 49%, analysts felt that an opportunity was created for foreign carriers to acquire their Indian counterparts.
For instance, if Qatar Airways acquires a maximum possible stake of 49% in Spicejet and wants to partner with another foreign entity for the balance 51% stake, the government will conduct due diligence to ensure the latter is at arm’s length from Qatar Airways before being allowed to pick up a majority stake. Also, if a foreign investor wants to wholly own a domestic scheduled airline, its associations with foreign airline companies will be ascertained.
“The government, through an inter-ministerial committee, will examine the proposal of any foreign investor wanting to acquire more than 49% stake in a domestic carrier. Several factors would determine the government’s approval, including whether the entity indeed has an arm’s length distance from the foreign airline,” Choubey said.
23/06/16 Bilal Abdi/Financial Express
