The Indian government is consideringa proposal to increase the foreigndirect investment (FDI) limit in scheduleddomestic carriers to 74 percentfrom 49 percent, the Economic Timesreported. The idea is being mootedto increase the funding options fordomestic airlines, which have drawnup huge expansion plans. Domesticcarriers are expected to buy close to480 aircraft in five years involving aninvestment of $30 billion.
The proposed increase in FDI indomestic carriers would, however, comewith a restriction. Though FDI in thesector is allowed, no foreign airlinecompany can have a direct or indirectstake in domestic carriers. Even foreignequity funds in which airline companieshave a stake are barred from investingin domestic carriers.
Various foreign private equity firms,institutional investors and NRIs havebeen increasing their stakes in Indiancarriers. Foreign stakes in SpiceJetand Air Deccan has already reachedclose to 40 percent. Moreover, mostcompanies in the sector including JetAirways, Kingfisher Airlines, GoAir, IndiGoand Air Deccan are in talks withprivate equity players for mobilisingdebt and equity.
Civil aviation minister Praful Patelhad earlier announced that the governmentis keen on raising FDI capto 74 percent in cargo, helicoptersand non-scheduled carriers from 49percent. FDI in airports and airlinesis considered important for the governmentto achieve its long-term planof creating an aviation grid across thecountry by developing 400 airportsand airstrips.