DIPP Proposed 26 per cent Foreign Direct Investment (FDI) in Domestic Airlines

The Department of Industrial Policy and Promotion (DIPP) on 22 November 2011 moved a Cabinet note, proposing 26 per cent foreign direct investment (FDI) in domestic airlines. The note is opposed to move by the Civil Aviation Ministry, which has stuck to 24 per cent FDI in domestic carriers.

DIPP is of the opinion that anything below 26 percent would not attract strategic investment from foreign airlines because in that case they will not have any powers to block a special resolution in a board meeting under the Indian company laws.

The move came at a time when several domestic airlines are in complete financial mess and struggling to run their day-to-day operations. IndiGo is the only carrier that registered a profit in 2010-11. According to lobby group Federation of Indian Airlines (FIA), private airlines in India lost Rs3500 crore in the six months ended September 2011 more than the Rs2900 crore they lost in all of 2010-11. Kingfisher reported a net loss of Rs.468 crore, Jet Airlines Rs.713 crore and Spicejet Rs.240 crore for the second quarter of 2011-12 under the impact of rising AFT price and weakening rupee.

India allows overseas investment of up to 49% in Indian carriers, but foreign airlines are not allowed to invest directly or indirectly in domestic ones due to security concerns. Non-resident Indians (NRIs) can invest 100 per cent.