Government May Lift Bar On Foreign Airlines To Invest In Air India

Even though the consolidated FDI circular keeps Air India out the ambit of being bought by a foreign airlines, Top sources indicate that that government may look at tweaking the FDI norms that will help in finding more takers and allow participation of foreign entities in the sale of the loss making national carrier Air India.

While the final decision will be taken after an opinion of the transaction advisors, sources close to the development tell ET Now that the government may extend the FDI policy to allow foreign airlines to pick 49% stake in Air India.

“We have various options on the table for the sale of Air India. No option would be finalised until transaction advisors views are taken,” the official, who didn’t wish to be identified told ET Now.

Under current regulations, foreign airlines can buy up to 49% in any Indian carrier except Air India, but non airline companies can fully own Indian carriers including Air India. However, the government enjoys discretionary power to tweak foreign direct investment policy on a case by case basis for select state-run enterprises.

New Delhi believes tweaking FDI rules may open the route for a combined bid by domestic and international carriers that are looking to take a slice of the pie or even give government an option to retain majority control.

India’s cabinet had in June given an in-principle approval for a strategic disinvestment in financially strained Air India. A successful stake sale is expected to lift some weight off governments finances, and free up tax payers’ money that can be channeled to social welfare projects and infrastructure development, which offer wider economic gains.

Until now, InterGlobe Aviation, which runs local carrier Indigo has bid for Air India’s international operations, while privately-held Bird Group has shown interest to buy the ground-handling unit of Air India.

Air India had net debt of 520 billion rupees as of end-March 2017. The figure includes working capital and other debt of 320 billion rupees and aircraft debt of 200 billion rupees.

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