FDI in Indian carriers may take a month

Airlines getting FDI must have Indians as CEO

It may take at least a month to implement the government’s policy to allow investments by foreign airlines in Indian carriers.

Officials in the Civil Aviation Ministry told Deccan Herald on Saturday that they were expecting the minutes of Friday’s meeting of the Cabinet Committee on Economic Affairs, which approved 49 per cent FDI in Indian carriers, by next week. The ministry will then frame the rules, which will have to be approved by the Law and Finance ministries.

According to the approved policy, the airlines getting foreign funding will be required have Indian citizens as CEO and MD while three-fourth of the directors should be Indians.

Considering security issues, the proposals will be vetted by the Foreign Investment Promotion Board. Besides, the joint venture company will have to be registered in India, doing its major business within the country.

However, high price of jet fuel and airport charges could be a dampener for the foreign airlines keen to enter the Indian market.

Foreign airlines like the Emirates, Singapore Airlines, Etihad, Lufthansa, Virgin Atlantic and Cathay Pacific may be among the carriers interested in investing in India. While British Airways is not too keen on entering India as yet, IANS quoted Etihad as saying: “It is our policy not to comment on such speculations. If or when we do make further investments of this sort, we will announce them in line with regulatory and commercial requirements.” The Gulf carrier has investments in AirBerlin, Air Seychelles and Aer Lingus. Emirates too welcomed the government move.

Industry body International Air Transport Association (IATA) was, however, cautious. IATA country director Amitabh Khosla said: “This is a positive and important step forward.  It allows Indian carriers to have strategic tie-ups with foreign airlines cemented by an equity stake. But allowing FDI by foreign airlines by itself is not a panacea.”  Critical problems like high cost environment, insufficient infrastructure and crippling taxes must also be addressed, he added.

Most of the Indian carriers welcomed the move. The bleeding Indian carriers, besides the lone exception IndiGo, have so far incurred a loss of Rs 12,000 crore in the last financial year out of the accumulated losses of Rs 42,700 crore, while their collective debt is to the tune of Rs 90,000 crore. Budget carriers SpiceJet and GoAir, besides Captain G R Gopinath’s new airline, may opt for foreign funding while Kingfisher Airlines may find it hard to attract funds, thanks to its severe financial crisis. IndiGo and Jet Airways are unlikely to opt for FDI.