FDI in aviation tops cabinet agenda

Keen to shrug off the tag of policy paralysis and counter criticism that it has not been bold enough in pushing the reforms agenda forward, the Union Cabinet is expected to take crucial decisions on the issues of allowing foreign airlines to buy up to 49 per cent stake in Indian carriers and divestment in five public sector undertakings (PSUs).

Besides FDI in aviation sector, the other proposals that are expected to be discussed during the meeting of Cabinet Committee on Economic Affairs relate to allowing foreign investment in trading exchanges and raising FDI cap in various segments of broadcasting sector to 74 per cent.

With many Indian carriers such as Kingfisher Airlines and Air India in bad shape with huge debts on their books, domestic airlines have been pitching for equity infusion from overseas investors, specifically foreign airlines.

Currently, the government allows foreign investors not related to airline business to buy up to 49 per cent stake in domestic airlines but foreign carriers are not permitted to invest in them.

Allowing foreign airlines to buy stake in domestic carriers is expected to benefit Vijay Mallya-promoted Kingfisher Airlines, which has a debt of over `7,000 crore.

While Mallya has been advocating for giving nod to foreign airlines to invest in domestic carriers, other major carriers like Jet Airways and IndiGo are not in favour of it.

According to sources, the proposal on FDI in aviation sector has emphasised that the chairman and two-thirds of the board of any domestic airline receiving FDI will need to be Indians, and substantial ownership and control will remain with Indian nationals.

Also, all foreign nationals participating in the venture will need security clearance. Equipment imports will have to be vetted by the aviation ministry.

Also topping the agenda of Cabinet is the much-awaited decision on government’s plan to sell stakes in five PSUs — National Aluminium Company Limited (NALCO), Hindustan Copper, Oil India Limited, MMTC and Neyveli Lignite Corporation.