To Revive Air India, Govt Offers 100% FDI

Air India

In order to revive the struggling Air India, the government modified the Foreign Direct Investment (FDI) policy in Civil Aviation to allow Non-Resident Indians (NRIs) to buy a 100% stake in the airlines.

Crux of the Matter

Air India, a state-owned airline company has been struggling to survive for quite a long period of time now. The government came up with the idea of selling its stake and equalize the losses. The government had attempted to sell 76% of Air India’s stake in the past but failed to do so. Changing the companies law has easied Foreign Direct Investment. Under the new amendment, there will be changes in the way of direct overseas listing and decriminalizing offenses.

As per the present FDI Policy, 100% FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic up to 49% and Government route beyond 49%). However, for NRIs 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline. Further, FDI is subject to the condition that Substantial Ownership & Effective Control (SOEC) shall be vested in Indian Nationals as per aircraft rules, 1937.

– Indian Government

Previously, NRIs could only buy stake up 49%. But now they can acquire up to 100% stake, which will help the government in the divestment of the debt-ridden airline. “Today’s decision on Air India is one milestone decision where NRIs who are Indian citizens will get permission to invest 100% in the airline,” Information and Broadcasting Minister Prakash Javadekar told reporters in a briefing. Even after the disinvestment, substantial ownership and handling of airplanes will remain in hands of the Indian nationals.

Companies amendment acts have been made as part of the ‘ease of doing businesses‘ agenda. The amendment is “meant to liberalize and simplify the FDI policy to provide ease of doing business in the country”, the government said.

Curiopedia

Air India is the flag carrier airline of India, headquartered at New Delhi. It is owned by Air India Limited, a government-owned enterprise, and operates a fleet of Airbus and Boeing aircraft serving 94 domestic and international destinations. The airline was founded by J. R. D. Tata as Tata Airlines in 1932; Tata himself flew its first single-engine de Havilland Puss Moth, carrying air mail from Karachi to Bombay’s Juhu aerodrome and later continuing to Madras (currently Chennai). After World War II, it became a public limited company and was renamed as Air India.

In 2007, Air India and Indian Airlines were merged under Air India Limited and the airline took delivery of its first Boeing 777 aircraft. The airline was invited to be a part of the Star Alliance in 2007. The combined losses for Air India and Indian Airlines in 2006–07 were ₹7.7 billion (US$110 million) and after the merger, it went up to ₹72 billion (US$1.0 billion) by March 2009. In 2013, the then-Civil Aviation Minister Ajit Singh stated privatisation was the key to the airline’s survival. However, the opposition led by the BJP and the CPI(M) slammed the government. In March 2018, Government issued “Expression of Interests”‘ to sell 76% stake of Air India along with Low-cost airline Air India Express and 50% stake of AISATS, a ground handling joint venture with Singapore Airport Terminal Services (SATS). According to the EOI, the new owner will take on a debt of ₹33,392 crore (US$4.7 billion) and it was supposed to be submitted by mid-May as the Government wanted to complete the selling process by the end of 2018, but any private firm did not show any interest in buying the debt-laden airline. More Info

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