The government will shortly consider a proposal to allow foreign airlines to invest in domestic carriers, a move that could offer a breather to cash-trapped domestic airlines. The Economic Times reported that the Industry Ministry has circulated a draft cabinet note for inter-ministerial consultation after getting the nod from the Civil Aviation Ministry.
“Though the aviation ministry has given an in-principal approval, the sectoral cap will be decided by the Cabinet,” an official of the Department of Industrial Policy and Promotion (DIPP), which frames policy on foreign direct investment, was reported saying.
While DIPP favours a 26% cap on foreign airlines’ holding, the Aviation Ministry wants it restricted to 24%. A holding above 25% gives the right to block a ‘special resolution’.
“No foreign airline would be allowed to participate directly or indirectly in the equity of an air transport undertaking engaged in operating scheduled and non-scheduled air transport services, except cargo airlines,” the current policy states.
According to industry estimates, private domestic airlines have run up losses of more than INR3,500 crore in the first half of the current fiscal year.