Govt allows NRIs to now acquire up to 100% equity in Air India

Topics Air India | Prakash Javadekar | NRI

According to existing norms, 100% FDI is permitted in scheduled domestic carriers, subject to certain conditions.
In order to shore up interest in the privatisation of state-owned Air India, non-resident Indians (NRIs) who are citizens of India, have been allowed to own 100 per cent stake in the airline. The small tweak has now brought foreign investment rules in Air India on a par with other private carriers. 

This has been termed a landmark decision by Union minister Prakash Javadekar. He said the move will increase the opportunity for gaining investment for the airline.

“NRIs, who are Indian nationals, will get permission to invest in Air India. This will pave the way for fresh investments. Passengers will continue to get better services and it will also improve the business environment,” said Javadekar.

In January, the government had invited expressions of interest (EoIs) from investors for its entire stake in Air India, along with subsidiary, Air India Express, as well as 50 per cent stake in Air India SATS Airport Services. SATS is a joint venture between Air India and Singapore Airport Terminal Services.

However, allowing 100 per cent investment (by NRIs) in the carrier would also not be in violation of the Substantial Ownership and Effective norms. NRI investments would be treated as domestic investments.

Under the substantial ownership and effective control (SOEC) framework, which is followed in the airline industry globally, a carrier that flies overseas from a particular country should be substantially owned by that country’s government or its nationals.

Currently, NRIs can acquire only 49 per cent in Air India. Foreign direct investment (FDI) in the airline is also 49 per cent through the government’s approval route.

According to existing norms, 100 per cent FDI is permitted in scheduled domestic carriers, subject to certain conditions.

In the case of scheduled airlines, 49 per cent FDI is permitted through the automatic approval route and any such investment beyond that requires the government’s nod.

As part of its attempts to sell the carrier, the government has changed multiple conditions in the order to sweeten the offer. These include selling 100 per cent stake against 76 per cent previously.

The others include reduction in debt — the successful bidder will have to take over debt worth only Rs 23,286.5 crore. The liabilities would be decided depending on current assets at the time of closing the transaction.

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