September 1, 2017 TnH Global

Indian mindset for ownership of Air India, in theory all open, says aviation minister

Civil aviation minister Ashok Gajapathi Raju on Thursday said the “Indian mindset” is to keep the ownership of Air India within the country but “theoretically everything is open”, including allowing foreign bidders.

His comments assume significance as it indicates that the government might tweak the Foreign Direct Investment (FDI) norms with respect to Air India — the loss- making national carrier for which a group of ministers is working on the disinvestment modalities.

When asked whether it would be right to interpret that Air India stake sale would also be open for FDI, Raju said: “I think Indian mindset is not inclined towards that but theoretically everything is open. Indian mindset is that this is a national carrier. Interpretations can (be done) by anyone. Theoretically …general inclination is to keep it, that is more or less the thinking of everyone.”

The current FDI policy does not permit foreign airlines to invest in Air India whereas they are allowed up to 49 per cent stake in domestic Indian carriers.

“It is all theory. As of now, nothing has been said, this is the thing where we stop… Those decisions are not there but they will come. It is a matter of time,” Raju told PTI in an interview.

He was replying to a question on whether foreign entities or airlines would come into Air India. “If we want to keep the airline within India, then there is one angle… What type of restriction we would like to have and what type of thing is workable, these have to be analysed,” the minister said. He was responding to a query on whether the FDI option is also on the table in talks about the alternative mechanism in place to guide the Air India disinvestment process.

Stressing that options are always there, Raju said ultimately a decision has to come on that. As part of efforts to revive the airline, which has a debt burden of over Rs 50,000 crore, the Cabinet Committee on Economic Affairs (CCEA) gave the in-principle nod for its strategic disinvestment in June.

Subsequently, an Air India-specific Alternative Mechanism was set up to guide the process. The ministerial group, headed by finance minister Arun Jaitley, is looking into treatment of Air India’s unsustainable debt, hiving off of certain assets to a shell company, demerger and strategic disinvestment of three profit-making subsidiaries, among other aspects. Responding to a query on whether FDI norms in general would be part of the alternative mechanism framework, Raju acknowledged that FDI is certainly a larger issue.

“Now whatever you do for here (with respect to Air India) it will not end or begin here. It will have an impact,” he said, adding that alternative mechanism is looking at it and they would take a call. Whatever it is, if they want to probably change certain things, it will have to go back to the Cabinet,” he added.

To a question on whether the alternative mechanism might be a starting point from where there could be larger changes with respect to SOEC (Substantiative Ownership and Effective Control), the minister only said, “Air India has always impacted aviation in India and it will continue to impact for sometime to come”.

About the FDI policy announced last year wherein 100% overseas investment was allowed in domestic airlines, the minister said theoretically what the commerce ministry had was 100 per cent FDI while keeping the existing conditions intact.

“The existing conditions are what, they are not conducive. Now, if SOEC has to be looked at along with 100 per cent FDI, do you think it is practical? You understand what I mean,” he wondered.

Foreign entities can have up to 100 per cent stake in a domestic carrier while an overseas airline’s shareholding is capped at 49 per cent. However, as per civil aviation ministry regulations, the SOEC of a local carrier should be with Indian nationals only.