NEW DELHI: The civil aviation ministry has recommended security checks by the home ministry and clearance by the Foreign Investment Promotion Board as the critical modalities for allowing foreign airlines to take up to 49% stake in Indian carriers.
Civil aviation minister Ajit Singh told ET that his department will send its recommendations to the Department of Industrial Policy and Promotion (DIPP), which is preparing a Cabinet note on the proposal of allowing foreign carriers to pick up 49% stake in domestic airlines.
"As safety and control features, we have recommended that all investment proposals by foreign airlines into our carriers should be cleared by the security committee of the home ministry, and they will have to come through the FIPB route," Singh said.
The prerogative of granting routes and slots to foreign airline partners will rest with the aviation ministry and it is not proposing any country-specific ban on interested airlines, the minister added.
At present, foreign carriers are banned from directly investing into Indian carriers, but financial and other non-airline investors can invest up to 49% in Indian airlines, while non-resident Indians are allowed to invest up to 100%. These entities do not require clearance of the FIPB and can invest through the automatic route.
Security clearances are required only for FDI proposals in ground-handling services, which include check-in, baggage handling, cargo handling, aircraft cleaning, loading and unloading of food & beverages on aircraft, providing electricity back-up to aircraft while they are at airports, supplying water to aircraft, ferrying passengers to and from planes, and maintaining toilets.
Investment experts say that such security checks are welcome, considering that aviation is a sensitive sector.
"The proposed home ministry security check is a sensible move as it will ensure that there are no security concerns and unwanted elements don't get in," global consultancy firm Ernst & Young Tax Partner Paresh Parekh said.
Recently, key ministries agreed to allow foreign airlines to buy up to 49% in domestic carriers, setting the stage for international airlines to come to the rescue of the cash-strapped Indian aviation sector.
"If we want to see India as an aviation hub, more airlines should be allowed to enter. Foreign airlines, who have technical know-how, are the obvious partners for domestic carriers," the minister said.
US and Canada limit the amount of foreign ownership in their domestic airlines to a maximum of 25%, while the Middle East bars it completely.
The move to allow foreign airlines to invest in the aviation sector comes after months of hectic lobbying by loss-making carriers such as Kingfisher Airlines and GoAir. However, many experts also say that FDI isn't a solution to the sector's debt problems.
Industry body Assocham has estimated that airlines could suffer losses about Rs 15,000 crore in the current financial year, with Air India alone likely incur more than half of it. Meanwhile, Indian airlines have a total debt of Rs 70,000 crore.
(Source- http://economictimes.indiatimes.com)
Civil aviation minister Ajit Singh told ET that his department will send its recommendations to the Department of Industrial Policy and Promotion (DIPP), which is preparing a Cabinet note on the proposal of allowing foreign carriers to pick up 49% stake in domestic airlines.
"As safety and control features, we have recommended that all investment proposals by foreign airlines into our carriers should be cleared by the security committee of the home ministry, and they will have to come through the FIPB route," Singh said.
The prerogative of granting routes and slots to foreign airline partners will rest with the aviation ministry and it is not proposing any country-specific ban on interested airlines, the minister added.
At present, foreign carriers are banned from directly investing into Indian carriers, but financial and other non-airline investors can invest up to 49% in Indian airlines, while non-resident Indians are allowed to invest up to 100%. These entities do not require clearance of the FIPB and can invest through the automatic route.
Security clearances are required only for FDI proposals in ground-handling services, which include check-in, baggage handling, cargo handling, aircraft cleaning, loading and unloading of food & beverages on aircraft, providing electricity back-up to aircraft while they are at airports, supplying water to aircraft, ferrying passengers to and from planes, and maintaining toilets.
Investment experts say that such security checks are welcome, considering that aviation is a sensitive sector.
"The proposed home ministry security check is a sensible move as it will ensure that there are no security concerns and unwanted elements don't get in," global consultancy firm Ernst & Young Tax Partner Paresh Parekh said.
Recently, key ministries agreed to allow foreign airlines to buy up to 49% in domestic carriers, setting the stage for international airlines to come to the rescue of the cash-strapped Indian aviation sector.
"If we want to see India as an aviation hub, more airlines should be allowed to enter. Foreign airlines, who have technical know-how, are the obvious partners for domestic carriers," the minister said.
US and Canada limit the amount of foreign ownership in their domestic airlines to a maximum of 25%, while the Middle East bars it completely.
The move to allow foreign airlines to invest in the aviation sector comes after months of hectic lobbying by loss-making carriers such as Kingfisher Airlines and GoAir. However, many experts also say that FDI isn't a solution to the sector's debt problems.
Industry body Assocham has estimated that airlines could suffer losses about Rs 15,000 crore in the current financial year, with Air India alone likely incur more than half of it. Meanwhile, Indian airlines have a total debt of Rs 70,000 crore.
(Source- http://economictimes.indiatimes.com)
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