Budget 2020 Expectations: Modi government to announce 100% FDI in aviation sector?
The preparations for Budget 2020 are in full swing.
The preparations for Budget 2020 are in full swing. And, amid all expectations and hopes from industry, it has been reported that the Modi government is contemplating a budget announcement to hike the foreign direct investment (FDI) limit in the aviation sector from 49 per cent to 100 per cent to attract international bids for Air India, slated for sale this financial year.
The current aviation FDI cap was not attractive enough and an increase would help troubled airlines, like Air India and Jet Airways, find buyers, sources said, as per a report in IANS.
The Substantial Ownership and Effective Control (SOEC) clause bars any foreign investor from taking complete control of an airline, run by a board that has two-third members as Indians.
In the last budget speech in July, Finance Minister Nirmala Sitharaman said the government proposed to hike the FDI limit in domestic air carriers from the 49 per cent. "The government will examine suggestions of further opening up of the aviation, media (animation, AVGC) and insurance sectors in consultation with stakeholders," she had said.
FDI in Aviation Sector
In the aviation sector, the 100 per cent FDI is allowed under automatic route for MRO (maintenance, repair, overhaul), ground handling and aircraft purchase.
"In the airline operation, there is an issue of substantial ownership and effective control. Thus, the Civil Aviation Ministry will have to see all these to sell Air India, which would require liberalising FDI in the sector," said an official, as per IANS.
"The 100 per cent FDI will have a better effect on the Air India bidding prospects. The Civil Aviation Ministry is in the loop," said sources.
Jet Airways had been grounded since April 18.
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