NEW DELHI, 9 December 2003 — Foreign airlines should be allowed to invest up to 49 percent equity in the country’s aviation sector, a high-powered aviation committee appointed by the government recommended yesterday.
The government has in the past disallowed equity holdings by a foreign airline in the aviation sector for security reasons.
According to a draft policy drawn up by the committee and released to the media yesterday, foreign airlines should be allowed to invest up to 100 percent equity in other ventures, such as helicopter services.
“Foreign equity investment norms pertaining to both domestic and international scheduled air transport services should be further liberalized to allow up to 49 percent foreign investment,” the committee recommended.
The recommendation, if approved would allow investment in India’s two private domestic airlines, Sahara and Jet, as well as new airlines but not in state-run international carrier Air-India or its domestic partner, Indian Airlines.
However, the committee also recommended that both Indian Airlines and Air- India should be privatized, which will pave the way for foreign investment.
“Toward this end, the government may consider private placement of shares of Indian Airlines and Air-India with domestic financial institutions and foreign institutional investors,” the committee said.
Its proposals are to be submitted to the Civil Aviation Ministry before being put to the Cabinet.
The issue of allowing foreign airlines investments has generated intense controversy in the past, particularly as the government had rejected an equity joint venture proposal between India’s giant Tata group with Singapore Airlines for a domestic airline some five to six years ago.
The Tatas were the one-time owners of India’s main international airline Air-India and the decision attracted criticism from aviation experts who said that it prevented free competition in the market.
Since then, Jet Airways and Sahara have been the two main private carriers operating in India’s domestic skies.
The committee also recommended that domestic private airlines should be allowed to fly on international routes.
