Govt exploring options to ease FDI norms to attract bidders for Air India

Topics FDI norms | FDI | Air India

Illustration: Ajay Mohanty

The Department for Promotion of Industry and Internal Trade (DPIIT) and the civil aviation ministry are looking at the possibility of relaxing foreign direct investment norms to attract bidders for national carrier Air India, an official said.

The government for long has been trying to sell debt-ridden Air India but could not attract bidders. It has now again decided to call bids for sale next month.

In the aviation sector, 100 per cent FDI is allowed under automatic route forO (Maintenance, Repair, Overhaul), ground handling, and aircraft purchase.

"But in airline operation, there is an issue of substantial ownership and effective control. So there, we are talking to the civil aviation ministry to see whether they are interested in liberalising it," the official said.

"It is felt that if you allow 100 per cent foreign direct investment (FDI), probably it will have a better effect on the Air India bidding prospects. The civil aviation ministry is also aware of that. We are taking it up with them also," the official added.

The airline is sitting on a debt pile of around Rs 58,000 crore, besides huge accumulated losses running into thousands of crores.

The issue, among others, is expected to figure in a meeting of an inter-ministerial group on Tuesday.

The group would discuss the possibility of further simplifying and easing FDI policy to attract overseas investors.

According to the official, the department is looking at relaxing norms in those sectors where currently 100 per cent FDI is not permitted through automatic route.

"We are looking at sectors where 100 per cent automatic is not there. We are looking at all those sectors and are talking to all those departments, whether they want further liberalisation in that," the official added.

The DPIIT is also consulting with some trade and investment bodies to understand their requirements.

Based on the unanimity in the inter-ministerial consultation, the department will work out a proposal.

"Basic target is those sectors, where there is a government approval route and 100 per cent FDI is not there," the official said.

Officials from different ministries, including defence, information and broadcasting, electronics and IT, and finance, will attend the meeting.

Although FDI is allowed through automatic route in most of the sectors, certain areas such as defence, telecom, media, pharmaceuticals and insurance, government approval is required for foreign investors.

Under the government route, the foreign investor has to take prior approval of the respective ministry/department. Through the automatic approval route, the investor just has to inform the RBI after an investment is made.

There are nine sectors where FDI is prohibited and that includes lottery business, gambling and betting, chit funds, Nidhi company, real estate business, and manufacturing of cigars, cheroots, cigarillos and cigarettes using tobacco.

Recently the government relaxed FDI norms in sectors like single-brand retail trading, contract manufacturing, and coal mining.

Finance Minister Nirmala Sitharaman in her Budget speech in July had proposed relaxation in the FDI norms for certain sectors such as aviation, AVGC (animation, visual effects, gaming and comics), insurance, and single-brand retail to attract more overseas investment.

Currently, a standard operating procedure is laid out by the DPIIT through which FDI proposals are processed within a fixed time period of 8-10 weeks.

During the April-June period of the current fiscal, FDI into India increased by 28 per cent to USD 16.33 billion.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel