Central government modifies FDI policy, foreign airlines to be allowed to invest upto 49 per cent in Air India

Foreign Direct Investment is a major driver of economic growth and a source of non-debt finance for the economic development of the country.

The Central Government has put in place an investor friendly policy on FDI, under which FDI up to 100%, is permitted on the automatic route in most sectors/ activities.

As per the extant policy, foreign airlines are allowed to invest under Central 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.

According to a release following the Union Cabinet meeting on Wednesday, it has now been decided to do away with this restriction and allow foreign airlines to invest up to 49% under approval route in Air India subject to the conditions that (i) oreign investment(s) in Air India including that of foreign Airline(s) shall not exceed 49% either directly or indirectly and (ii) substantial ownership and effective control of Air India shall continue to be vested in Indian National.

The Central government has been working on the modalities for some time now for strategic disinvestment of the loss- making Air India.

The change in FDI rule is expected to attract more bidders for the airline, reports said.