Raju: FDI move will prevent preferential treatment for AI

The Union Cabinet has decided to allow foreign investments, including from foreign airlines, to upto 49 per cent in Air India, provided that substantial ownership and effective control of the airline is vested in an Indian national.

"(The Cabinet decision means) Air India is on par with other airlines within the country. So, in a way it is not a differential treatment, rather the preference that was there (has been done away with)," Raju said shortly after the government announced the move.

As per the existing policy, foreign investment upto 100 per cent was allowed for scheduled and non-scheduled operators and foreign airlines could invest up to a limit of 49 per cent of their paid up capital. However, these provisions were not applicable to Air India.

"It has now been decided to do away with this restriction," the government said in a statement.

On whether the move will attract foreign bidders for Air India's disinvestment, Raju said, "We would like them to come and participate."

"Ultimately the public sector is not supposed to become a financial drain for the tax payer. Air India's woes are basically financial. Basically it is that. So, lets see where it takes us," the minister said.

Last year, the Union Cabinet gave its in-principal approval for disinvestment of Air India and constituted an inter-ministerial group to chalk out the strategy for its stake sale.

Surviving on taxpayers' money, Air India is estimated to have a debt burden of more than Rs 50,000 crore. Various efforts are being made to improve the financial performance of the national airline, including by way of sale of non-core assets. Under a turnaround plan approved by the previous UPA regime, Air India is to receive up to Rs 30,231 crore from the government subject to meeting certain performance thresholds.

The ten-year bailout package began from 2012.

The International Air Transport Association (IATA), a global grouping of airlines that includes Air India, said the amendment in the FDI policy is a step in the right direction.

Singapore Airlines said it will keep options open on Air India disinvestment.

Aviation think tank CAPA welcomed the decision to allow foreign airlines to invest up to 49 per cent in Air India.

However, the government's decision to allow FDI in Air India was opposed by the Congress and the Left.

"Interesting-Commandeer a low valuation report, sell Air India to a crony oligarch who in turn disinvests 49 per cent to a foreign airline at hefty premium," Congress spokesperson Manish Tewari said in a tweet.

Last year, the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle nod for strategic disinvestment of the airline.