The Centre has proposed to dilute substantial ownership and effective control clause for airlines in the Aircraft Rules, 1937 to give effect to its new Foreign Direct Investment (FDI) policy.
An air operator permit is granted to a company only if it is registered in India, the Chairman and its two-third directors are Indian citizens and the substantial ownership and effective control (SOEC) is vested in Indian nationals, according to the present rules.
However, the government has proposed to dilute these norms by doing away with the SOEC clause and allowing just a third of directors to be Indian citizens against two-thirds prescribed at present. Also, it has proposed that either the Chairman or Managing Director or Chief Executive Officer needs to be an Indian citizen. This means, the Chairman of an airline can be a foreign citizen under the proposed norms.
Major issue
Amber Dubey, Partner and India Head of aerospace and defence at global consultancy KPMG, welcomed the government’s proposal to liberalise the norm regarding foreign chairman and board members but said the real issue of allowing majority control of airline by foreign airline is still unresolved.
According to another proposal, it will be mandatory for an airline to hold the meeting of its board of directors in India and its books of accounts should be based at the airline’s headquarters in India.Applicant will need to obtain an initial no objection certificate (NOC) from the Centre for setting up an airline in India. The Union Government will take into account factors such as the financial soundness, operational plan of applicants along with “clearance from security angle of the applicant organisation” before granting an NOC.
It has further proposed doing away with the requirement of the Directorate General of Civil Aviation (DGCA) making the application public and inviting representations from the public.
The proposed changes come in the wake of the government’s decision earlier this year to raise FDI limit in scheduled commercial airlines to 100 per cent from 49 per cent. The Department of Industrial Policy and Promotion had issued a circular allowing a foreign carrier to invest up to 49 per cent to set up an airline in India but the rest, up to 51 per cent, can come from local or foreign investors including airports and sovereign fund.
