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India On Media |
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| Politics
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| 5 FAQs about foreign investment |
| 5 FAQs about foreign investment in Indian airlines
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| INDIA
, 18-January-2012
2:41:49 AM |
| New Delhi: In an attempt to bail out bleeding airlines, the government is considering whether to allow foreign airlines to own up to 49 per cent of Indian carriers. Right now, foreign investors can own up to 49 per cent stake in Indian airlines, but only if they are not in the airline business abroad. (Read: Can foreign airlines own upto 49% of Indian carriers?)
What the government is now considering would allow an airline like Virgin, for example, to own up to 49 per cent in a local carrier like Kingfisher - an earlier proposal suggested a cap on FDI at 26 per cent for foreign airlines.
Here is FDI in aviation made easy to understand in answers to five commonly-asked questions:
Q) Why is no foreign airline allowed to invest in Indian airline companies right now?
A) First, there is political opposition. The Left parties and trade unions have opposed this most vocally, as they have FDI in other key industries, citing fears of foreign takeover. Then, there is opposition by some domestic private airlines, especially big players like Jet Airways and Indigo. They too argue that the financial might of big airlines like might result in hostile bids and takeovers.
Security concerns, largely unfounded, have also been voiced that in a strategic sector like Aviation, what if rogue companies get access to vital information? That argument is countered by the fact that any foreign airlines that operate in and out of India would be privy to the same information.
All this opposition has meant that proposed joint ventures, like Tata-Singapore Airlines, never took off.
Q) So what is the government's new proposal?
A) In November last year, the commerce ministry proposed that foreign airlines should be allowed to own up to 26 per cent stake in an Indian airline.
Now, the government says that perhaps a foreign airline should be allowed to invest in an indian carrier up to 49 per cent.
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