Government permits 100% FDI in airlines

New Delhi: Foreign investors, barring overseas airlines, can now have up to 100 percent stake in local carriers, the government Monday said unveiling significant 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 percent 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 percent FDI in local carriers.

Under the new set-up, 49 percent will be through the automatic route and for anything beyond, government nod will be required. At present, up to 49 percent FDI is permitted in scheduled airlines.

"For NRIs, 100 percent 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 percent 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 percent in Indian carriers.

The decision to relax FDI norms was taken at a meeting chaired by Prime Minister Narendra Modi here today.

Interestingly, a proposal to hike the FDI limit from 49 percent 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 percent FDI in brownfield projects through automatic route.

Currently, 100 percent FDI is allowed through the automatic route in greenfield airport projects while it is 74 percent 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 percent FDI under automatic route in brownfield airport projects," the release said.

Back in 2012, the UPA government had permitted 49 percent 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.