FDI Relaxation In Aviation Likely To Help Find Buyers For Air India

The recent Budget announcement to further relax foreign direct investment norms and policies in the aviation sector may help sell Air India, as well as Jet Airways. Both commercial carriers were put up for sale after going bankrupt.

Finance Minister Nirmala Sitharaman, announced in the Budget that the government is looking to ease FDI norms to facilitate overseas investment in sectors like aviation, media, insurance intermediaries, and single brand retail.

“I propose to further consolidate, the gains in order to make India more attractive FDI destination. The government will examine suggestions of further opening up of FDI in aviation, media, AVGC (Animation, Visual effects, Gaming and Comics) and insurance sector in consultation with stakeholders,” she said. 

In her speech, Sitharaman also said that the government will continue the divestment of various Central Public Undertakings, including the national carrier, Air India.

She said, “I propose to further consolidate, the gains in order to make India more attractive FDI destination. The government will examine suggestions of further opening up of FDI in aviation, media, AVGC (Animation, Visual effects, Gaming and Comics) and insurance sector in consultation with stakeholders.”

This is not the first time the government tried to divest its stake in Air India. Earlier, the government tried to divest 76 per cent stake in the airlines but this attempt only met failure as the carrier did not find any takers.

The government now plans to sell 100 per cent and hopes that foreign direct investment relaxations will encourage overseas buyers. Although, no clarity on the Substantial Ownership and Effective Control (SOEC) clause has yet been given. According to the SOEC clause, foreign investors cannot take complete control of the operations of the airline and be run by a board that has two third members as Indian.