The Finance Ministry on Wednesday cleared the investment proposal of Malaysian budget carrier AirAsia which seeks to enter India through a joint venture with Tata Group and another company.

“AirAsia’s proposal has been cleared. It is as per the policy (which allows) up to 49 per cent FDI. Rs 80 crore is initial investment,” a senior government official said.

The Foreign Investment Promotion Board (FIPB), headed by DEA Secretary Arvind Mayaram, approved the proposal at its meeting here.

AirAsia will have a 49% stake in the venture; Tata Sons Ltd will hold 30 per cent and Arun Bhatia’s Telestra Tradeplace Pvt Ltd the remaining 21%

The carrier will now have to approach the aviation regulator Directorate General of Civil Aviation (DGCA) for further clearances.

This would be the first entry of a foreign carrier in the domestic aviation sector after the liberalisation of FDI policy in September last year.

AirAsia is looking to start flying from this year-end with 3-4 planes and an initial investment of about USD 50 million by the Malaysian budget carrier.

The proposed joint venture will operate from Chennai and will focus on providing domestic connectivity to Tier-II and Tier-III cities.

As per current rules, a carrier must complete five years of domestic operations before becoming eligible for starting overseas flights.

This will mark the return of Tatas to aviation sector.

State-owned Air India had grown out of Tata Airlines, which began flights in 1932.

AirAsia, through its operations based in Thailand and Malaysia, flies to Chennai, Bangalore, Kochi, Tiruchirappalli and Kolkata in addition to 20 countries.

Air Asia has made the move to invest even as Etihad and Jet Airways continue to work towards finalising a deal for the Gulf carrier to invest in Jet.

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