Cabinet may consider FDI by foreign airlines before budget

The civil aviation ministry's proposal to allow foreign capital by international airlines in cash-strapped domestic carriers may come up for the cabinet's approval before the budget session, a minister said Tuesday.

"We will send a proposal in regard to foreign airlines entering domestic carriers through FDI (foreign direct investment) to the commerce ministry and from there to the cabinet," Civil Aviation Minister Ajit Singh told reporters here.

"This may happen before the budget."

Currently, foreign airlines are not allowed to directly invest in Indian carriers for security reasons. However, 49 percent of FDI is allowed by non-airline players.
On Jan 17, a group of ministers (GoM) headed by Finance Minister Pranab Mukherjee agreed to draft a cabinet note proposing a 49 percent cap on FDI by foreign carriers' in domestic airlines.

Before this, various government departments has proposed different investment caps, from 24 percent to 26 percent. The commerce ministry's department of industrial policy and promotion (DIPP) had suggested a 26 percent cap.

"Private airlines in the country are in need of funds for operations and service upgradation to compete with other global carriers," said the DIPP note.
When asked whether foreign airlines would be interested in investing in domestic carriers, Singh said: "Indian civil aviation is growing at a very fast pace and we want to develop it (India) like a hub."

Owing to high jet fuel and interest costs, three major airlines -- Kingfisher, Jet and SpiceJet -- reported heavy second quarter losses.

On the report submitted by retired Supreme Court Justice D.M. Dharmadhikari on Air India's human resource integration issues, Singh said his ministry would study the findings and then initiate them.

"We have to study the report first and then see how best we can implement the suggestions in the report."

The committee which was formed in May 2011 was tasked to examine the issues of pay and wage rationalisation as well as restructuring of employees cadres in the post-merged Air India.

Air India was merged with erstwhile Indian Airlines five years ago, but several unions, including that of pilots from Indian Airlines, had went on strikes thrice last year to demand pay parity with their counterparts from Air India.