Cabinet clears 49% FDI in Air India

The disinvestment process  in Air India gained momentum on Wednesday with the Union Cabinet clearing a proposal to allow foreign airlines to invest up to 49% under approval route in the national carrier.

"Foreign investment(s) in Air India, including that of foreign airline(s), shall not exceed 49% either directly or indirectly. Substantial ownership and effective control of Air India shall continue to be vested in Indian national," an official statement said.

The decision was taken at a meeting of the Union Cabinet chaired by Prime Minister Narendra Modi, during which a clutch of decisions on Foreign Direct Investment (FDI) was cleared.

The government said the latest amendments are "intended to liberalise and simplify the FDI policy so as to provide ease of doing business in the country.  In turn, it will lead to larger FDI inflows contributing to the growth of investment, income and employment."

At present, under the government-approval route, foreign airlines are allowed to invest in the capital of Indian companies operating scheduled and non-scheduled air transport services up to 49% of their paid-up capital.

However, this provision was not applicable to Air India till now, thereby implying that foreign airlines could not invest in Air India.

"It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49% under approval route in Air India subject to conditions," the statement said.

The Union Cabinet on 28 June 2017 gave an "in-principle" go-ahead for the strategic disinvestment of debt-ridden Air India after tasking a Group of Ministers to work out its modalities.

The airline has a debt of more than Rs 52,000 crore and is surviving on the bailout package extended by the previous UPA government.

In 2000, the then A B Vajpayee government had cleared the disinvestment of Air India but it could not go through following protests.

After the Cabinet decision became public, low-cost carrier IndiGo and the Tata Group had evinced interest in the airline.