Govt mulling options to ease FDI norms to attract bids

Air India flight. (Reuters photo)

The Department for Promotion of Industry and Internal Trade (DPIIT) and the civil aviation ministry are looking at the possibility of relaxing foreign direct investment norms to attract bidders for national carrier Air India, an official said.

The government for long has been trying to sell debt-ridden Air India but could not attract bidders. It has now again decided to call bids for sale next month.

In the aviation sector, 100% FDI is allowed under automatic route for MRO (Maintenance, Repair, Overhaul), ground handling, and aircraft purchase.

“But in airline operation, there is an issue of substantial ownership and effective control. So there, we are talking to the civil aviation ministry to see whether they are interested in liberalising it,” the official said. “It is felt that if you allow 100% foreign direct investment (FDI), probably it will have a better effect on the Air India bidding prospects. The civil aviation ministry is also aware of that. We are taking it up with them also,” the official added.

The airline is sitting on a debt pile of around Rs 58,000 crore, besides huge accumulated losses running into thousands of crores. The issue, among others, is expected to figure in a meeting of an inter-ministerial group on Tuesday.

The group would discuss the possibility of further simplifying and easing FDI policy to attract overseas investors.

According to the official, the department is looking at relaxing norms in those sectors where currently 100% FDI is not permitted through automatic route. “We are looking at sectors where 100% automatic is not there. We are looking at all those sectors and are talking to all those departments, whether they want further liberalisation in that,” the official added.

The DPIIT is also consulting with some trade and investment bodies to understand their requirements.

Based on the unanimity in the inter-ministerial consultation, the department will work out a proposal. “Basic target is those sectors, where there is a government approval route and 100% FDI is not there,” the official said.

Officials from different ministries, including defence, information and broadcasting, electronics and IT, and finance, will attend the meeting.

Although FDI is allowed through automatic route in most of the sectors, certain areas such as defence, telecom, media, pharmaceuticals and insurance, government approval is required for foreign investors.

Under the government route, the foreign investor has to take prior approval of the respective ministry/department. Through the automatic approval route, the investor just has to inform the RBI after an investment is made.

There are nine sectors where FDI is prohibited and that includes lottery business, gambling and betting, chit funds, Nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.

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