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Paving ways to ease out Air India sale

By IndianMandarins- 04 Dec 2019


The Centre is considering amending a rule that allows overseas control of local airlines that may help debt ridden national carrier lure a foreign suitor after multiple failed attempts for its disinvestment. Department for Promotion of Industry and Internal Trade at a meeting in November had asked aviation ministry if it would be feasible to change the so-called substantial ownership and effective control clause.

Actually this rule mandates that control of an airline always remain in Indian hands, so this has been one of several reasons global firms have been wary of bidding forAir India. Doing away with the substantial ownership clause will enable an overseas stakeholder weigh in on major decisions of local airline? That may lure foreign investors to the Air India sale without forcing the government to go down the politically contentious route of lifting the cap on overseas equity investment.

At present, foreign airlines are barred from buying more than 49 per cent in a local carrier, and foreign investors, other than airlines, need government approval to buy a stake bigger than 49 per cent. Finance Minister Nirmala Sitharaman in her budget speech in July had said Prime Minister  Narendra Modi’s government will look into suggestions of opening up sectors including aviation to more foreign investment. It has already eased rules in a number of areas such as retail, manufacturing and coal mining.

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