Before the government allows foreign carriers to take 26 per cent stake in Indian airline companies , the Working Group on Civil Aviation (WGCA) comprising secretaries of various ministries has already proposed raising the foreign direct investment (FDI) limit to 49 per cent.
The members of the WGCA told the civil aviation secretary, who heads the group, that 49 per cent stake sale would be far more attractive to foreign carriers than 26 per cent. The WGCA comprises secretaries of the ministries of civil aviation, petroleum and banking, as well as the Director General of Foreign Trade (DGFT), which functions under the commerce ministry.
They (secretaries) felt that the Indian aviation sector was going through turmoil and that the FDI limit needed to be increased to 49 per cent in order to bring in much-needed large investments, said a top government official.
Voting right allows stockholders to vote on matters of corporate policy and composition of the board of directors. Voting often involves decisions on issuing securities, initiating corporate actions and making substantial changes in the corporation's operations. Currently, FDI up to 49 per cent is permissible in the aviation sector. But foreign airlines are not permitted to invest in domestic airline companies.
The ministry of civil aviation has in principle agreed to the hike in FDI limit to 49 per cent. The earlier draft Cabinet note had put the cap on FDI by foreign airlines at 26 per cent against 24 per cent planned originally by the civil aviation ministry.
A top official said DIPP, which functions under the commerce ministry may rework on the draft Cabinet note to allow 49 per cent stake sale to foreign carriers in Indian airline companies.
"Now we expect that the DIPP will re-draft it to formulate a new Cabinet draft note in this regard. The concerns of the aviation industry to hike FDI to 49 per cent will help most ailing Indian airliners," said an official. The new Cabinet draft note will then be circulated to various ministries, including the Union home ministry.
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