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Govt permits 100% FDI in aviation sector under new reforms

 PTI |  2016-06-21 22:58:15.0  |  New Delhi

Govt permits 100% FDI in  aviation sector under new reforms

Besides, the norms for foreign direct investment in brownfield airports have been relaxed. Aimed at attracting more funds into the aviation sector which has high growth potential, the NDA government’s latest measure comes less than a week after the unveiling of the National Civil Aviation Policy.

The announcement also comes against the backdrop of persisting concerns over ownership and control at local carriers where foreign players have a substantial stake. Now, 100 per cent foreign investment will be allowed in “scheduled air transport service/domestic scheduled passenger airline and regional air transport service”, an official release said.

Only non-airline players will be allowed to bring in 100 per cent FDI in local carriers. Under the new set-up, 49 per cent will be through the automatic route and for anything beyond, government nod will be required. 

At present, up to 49 per cent FDI is permitted in scheduled airlines. “For NRIs, 100 per cent FDI will continue to be allowed under the automatic route,” the release said. “However, foreign airlines would continue to be allowed to invest in capital of Indian companies operating scheduled and non-scheduled air-transport services up to the limit of 49 per cent of their paid-up capital and subject to the laid-down conditions in the existing policy,” it added.

Maintaining the status quo, foreign airlines will be allowed to invest only up to 49 per cent in Indian carriers. The decision to relax FDI norms was taken at a meeting chaired by Prime Minister Narendra Modi here on Monday.

Interestingly, a proposal to hike the FDI limit from 49 per cent in local airlines in the draft civil aviation policy did not find a place in the final document, which was approved by the Cabinet on June 15.

With regard to airports, the government has permitted 100 per cent FDI in brownfield projects through automatic route. Currently, 100 per cent FDI is allowed through the automatic route in greenfield airport projects while it is 74 per cent in brownfield ones.

“With a view to aiding in modernisation of the existing airports to establish a high standard and help ease the pressure on the existing airports, it has been decided to permit 100 per cent FDI under automatic route in brownfield airport projects,” the release said.

Back in 2012, the UPA government had permitted 49 per cent FDI in domestic airlines by foreign carriers. The move paved the way for setting up of two new airlines -- Vistara and AirAsia India -- and investment by Etihad Airways in Jet Airways. 

New FDI policy huge boost for economy, says FICCI
Commenting on the announcements by the government on Monday FICCI Secretary General A Didar Singh said, “Simplification in the policy framework governing investments in a whole host of sectors including strategic sectors like defence and aviation is a huge positive for the economy. The Modi administration through these moves has once again highlighted that reforms is a continuous process in order to capitalise the  potential India offers”. “There is no doubt that India today is the most preferred investment destination in the world. While the attraction of our market is known to all, there is now even more reason for global investors to commit themselves for making and doing business in India,” he added.

Relaxed FDI norms to boost manufacturing, generate jobs: Das
Manufacturing and job generation will get a boost by the latest round of liberalisation in Foreign Direct Investment (FDI) norms that include doing away with dual clearances, Economic Affairs Secretary Shaktikanta Das said on Monday. “With this (FDI) liberalisation, we expect manufacturing activity to come in...more activity in defence products. The driving force behind the whole thing is that all this investment should facilitate creation of jobs,” he told reporters here. The last set of major FDI reforms were announced by this government in November 2015. 

“The decision on FDI liberalisation today is a followup to the decisions which were taken last November when a whole lot of reforms were announced. In the budget (the relaxation) was announced in stock exchanges and NBFCs,” Das said. He further said that under the amendment norms, wherever approval is given by the regulator, the companies would not need to the approach the Foreign Investment Promotion Board (FIPB) for clearance. 

Basically, Das said, “the idea is to go for process simplification and make everything process driven. Now today’s decisions are also a continuation of the same approach that wherever there are regulators, there is no need for dual clearance by FIPB”. The whole approach is to make the process of FDI approval “as far as possible automatic,” he said, adding faster clearances would encourage investment flows and generate additional jobs in the economy. Moreover, he said, the policy changes also indicate that the government would continue the process of reforms. On changes in the FDI norms in the civil aviation, Das said the amended policy will improve flow of investment in the sector. 

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