Even as private players in India's ailing airline business scout around for foreign partners to bail them out, strenuous lobbying efforts by them to have foreign investment limits in the aviation sector hiked to 75 per cent from 49 per cent have run smack into inter-ministerial turbulence.
With some of the biggest players in the Indian aviation industry leaning on the government to liberalise the sector and allow greater infusion of foreign funds, the Finance Ministry recently asked the Department of Industrial Policy and Promotion (DIPP) in the Commerce and Industry Ministry to move a proposal seeking to hike the FDI limit in the sector from 49 per cent to 75 per cent.
The suggestion has not found favour with the Commerce Ministry, which is reluctant to move on the issue. Commerce Ministry wants the Finance Ministry to take the lead and send a proposal in writing, to which it would then respond after examining it. “We had long ago proposed a hike in FDI limit in the aviation sector but at that time the Finance Ministry had turned it down. Now suddenly they are pressing for such a proposal and want us to move it, which is not the right approach. The onus is on them to do the needful if they want action on this front,” a senior official said. The financial turmoil in the aviation sector due to the slowdown in economic growth has reduced airlines' revenue and forced them to redraw their strategies. One of the private airlines, owned by a flamboyant industrialist, is desperate for an infusion of foreign equity. “This company has been indulging in intensive lobbying with the powers that be to get the FDI limit hiked. But the Finance Ministry has to take a call on this issue and we will then give our opinion on this,” the official said.
A Committee of Secretaries headed by Cabinet Secretary K. M. Chandrasekhar had reviewed the aviation sector FDI policy some time ago. The Group of Ministers for aviation, headed by Finance Minister Pranab Mukherjee, has also discussed the matter.
As of now, FDI in civil aviation is allowed in airports and domestic scheduled passenger airlines, non-scheduled airlines, chartered airlines, cargo airlines and helicopter and seaplane services. For airlines, FDI allowed in the aviation sector is 49 per cent. However, non-resident Indians can own 100 per cent in an airline, but no direct or indirect equity participation by foreign airlines is allowed.