Air India, Airlines, BUSINESS AVIATION, Disinvestment, FDI

Foreign airlines can buy upto 49% in Air India

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Government eases norms for FDI in single brand retail, construction, civil aviation

The Union government on Wednesday, Jan 10 2017 liberalised and simplified the Foreign Direct Investment (FDI) regime in a host of sectors, including Single Brand Retail Trading (SBRT), civil aviation (aimed at facilitating Air India’s divestment), construction development, power exchanges, pharmaceuticals and audit firms.

The government said the goal was to help the country attract larger FDI inflows that is expected to contribute to growth of investment, income and employment in the country.

The Union Cabinet, chaired by Prime Minister Narendra Modi, gave its approval to permit 100 per cent FDI under the automatic route for SBRT. The extant policy on SBRT allows 49 per cent FDI under the automatic route, and FDI beyond 49 per cent and up to 100 per cent through the government approval route.

The government also decided to permit SBRT entities to set off their incremental sourcing of goods from India for global operations in the initial five years, beginning April 1 of the year of the opening of first store against the mandatory sourcing requirement of 30 per cent of purchases from India. After the completion of this five-year period, such SBRT entities shall be required to meet the 30 per cent sourcing norms directly towards its India’s operation, on an annual basis, an official statement said.

In FDI policy changes in other sectors, the government allowed foreign airlines to invest up to 49% under the approval route in Air India, subject to the conditions that: (i) Foreign investment(s) in Air India, including that of foreign Airline(s), shall not exceed 49 per cent either directly or indirectly and (ii) substantial ownership and effective control of Air India shall continue to be vested in Indian National.

As per the extant policy, foreign airlines are allowed to invest under the government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. However, this provision was presently not applicable to Air India, thereby implying that foreign airlines could not invest in Air India. The government, therefore, decided to do away with this restriction.

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