After a 90-minute meeting, the Foreign Investment Promotion Board or FIPB today gave approval, with some riders, to the Rs. 2,058 crore Jet-Etihad deal, which proposes a sale of 24 per cent stake in India's Jet Airways to Abu Dhabi's Etihad Airways. It will now need the Cabinet's nod.
Following are the latest developments in the story:
The FIPB wants the deal to be governed by Indian laws. A reworked agreement submitted today by Jet Airways proposes that the deal would be governed by English laws.
Also, the FIPB has said, any changes in the shareholding pattern will have to be approved by the Indian government.
The deal will now go to the Cabinet Committee on Economic Affairs (CCEA) and the Competition Commission of India (CCI) for approval.
Jet Airways has made major changes to its shareholders agreement to address concerns that it will lose effective control to Etihad in the deal. The FIPB had put off its decision last month, seeking details on who would be effectively in control - Jet or Etihad.
Under the reworked agreement, Etihad will now have two directors on the airline board and not three as proposed earlier. Jet Airways will have four directors.
There will also be six independent directors on the 12-member board. Appointments at senior levels will be decided by a majority in the board of directors.
Also commercial operations and air operations of the airline will remain in India. All foreign appointments will be made after security clearance by India.
Several Opposition members of Parliament have written to the Prime Minister alleging that the government has gone of its way to sweeten the deal for Etihad, which is UAE's national carrier.
They point to a bilateral agreement that the Civil Aviation Ministry signed with Abu Dhabi - on same day that the two Airlines announced their deal - to increase 36,000 seats on the India-Abu Dhabi route. The critics argue that a bulk of these seats will be used by Jet and Etihad and will put other airlines at a disadvantage.
The deal is the first since the Government allowed 49 per cent foreign participation in India's airline sector in September 2012. It would help Jet Airways, deeply in the red, to pay off debts. Jet shares traded high all day in anticipation and closed 4.2 per cent higher.
