January 4, 2017 TnH Global

IndiGo, SpiceJet raise red flag over FDI norms in aviation

IndiGo and SpiceJet have raised “security” concerns over the government’s decision to allow 100 per cent foreign ownership by non-airline players in the Indian carriers.

IndiGo and SpiceJet have raised “security” concerns over the government’s decision to allow 100 per cent foreign ownership by non-airline players in the Indian carriers. Spicejet CMD Ajay Singh and IndiGo President Aditya Ghosh have recently raised this issue during their meeting with Commerce and Industry Minister Nirmala Sitharaman.
During the meeting, the two airlines said aviation is a “sensitive sector” and the FDI policy relaxation would have “security implications”, according to sources. Spokespersons of IndiGo and SpiceJet could not be immediately reached for comments.
The meeting also assumes significance as the government is considering removal of an anomaly restricting foreign direct investment (FDI) in the civil aviation sector. The sector is faced with a Catch-22 situation where a foreign investor, excluding overseas airlines, can acquire up to 100 per cent stake in a local carrier. However, at present they cannot seek a scheduled operator’s permit since it can only be given to a company where substantial ownership and effective control is in the hands of Indian nationals.
As this condition restricts and prevents foreign investors from acquiring a domestic airline, there is a need to amend Aircraft Rules, 1937, to facilitate FDI in the sector. Due to this anomaly, the moment foreign investors buy 51 per cent or a controlling stake in a domestic airline, the scheduled air operator permit gets withdrawn. “So, this sectoral norm needs to be amended,” sources added.
As per the current policy, 100 per cent foreign investment is allowed in scheduled air transport service, domestic scheduled passenger airlines and regional air transport. Only non-airline players will be allowed to bring in 100 per cent FDI in local carriers.
Under the new set-up, 49 per cent will be through the automatic route and for anything beyond, government nod will be required. At present, up to 49 per cent FDI is permitted in scheduled airlines. The government is working to remove all anomalies which are restricting FDI into the country. FDI in 2015-16 grew 29 per cent to USD 40 billion.

News Source: PTI