The final cabinet note on the issue of allowing foreign airlines to buy upto 49% stake in domestic airline has been moved and it is expected that the government will soon take a view on it. It is also believed that the Prime Minister will have consultations with senior ministers to build consensus on the contentious issue before it is presented in front of the cabinet.
So far in India, foreign direct investment (FDI) in the airline industry is permitted but to only those who are not connected with the industry in any way. Foreign airlines are not allowed to invest in Indian airlines. Currently the sector is going through a rough phase with almost all airlines running into losses. Hence the government is looking at options to help the distressed carriers.
The Finance Minister in his budget speech had expressed the government’s intention to allow foreign airlines to participate in the Indian airline industry. However the move could face hurdles if other partners in the UPA coalition decide to oppose it as was seen on the issue of allowing 51% of FDI in multi-brand retail.
The response from the domestic airlines has been mixed. Kingfisher airline which is currently in a debt of Rs 7000 crores is pitching for it strongly whereas Jet Airways and Indigo are opposing the FDI.
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