Foreign Direct Investment in aviation gets a fresh push

New Delhi: In what could be a huge boost for the crisis in the Indian aviation sector, there are clear indications that the government is all set to allow foreign airlines to buy up to 49 per cent stake in Indian carriers. Sources say the Foreign Direct Investment (FDI) note in cabinet may come up next week in the Cabinet Committee on Economic Affairs. They also say that the Commerce Ministry is making some changes to the existing note that proposes foreign airlines to pick up stakes in an Indian carrier up to 49 per cent.

Civil Aviation Minister Ajit Singh has met Home minister P Chidambaram to discuss the issue as the Home Ministry had reservations about security clearances. The Government, however, needs the crucial go-ahead from its allies, especially Mamata Banerjee's Trinamool Congress. Sources say Prime Minister Manmohan Singh is keen to have Ms Banerjee on board.

Sources say the new provisions include that clearance will be given on a case-by-case basis and not automatically. Every airline/investor will have to invest in aviation-related activities like training facilities, engineering facilities, maintenance repair and overhaul (MRO) units to create employment, sources add. They also say that the airlines will have to ensure that their executives posted to India, apart from security cleared, would not have served in "sensitive countries" earlier.

Currently, foreign investors can own up to 49 per cent stake in Indian airlines, but only if they are not in the airline business abroad. What the government is now considering would allow an airline like Virgin, for example, to own up to 49 per cent in a local carrier like Kingfisher - an earlier proposal suggested a cap on FDI at 26 per cent for foreign airlines.