Foreign airlines allowed to invest up to 49 per cent in Air India

New Delhi: Ahead of the World Economic Forum in Davos which Prime Minister Narendra Modi will attend this month, the Union Cabinet on Wednesday opened up Air India for foreign investors and brought in changes in key sectors by allowing 100 per cent foreign investment in single brand retail and construction development through the automatic route.
The decisions, taken at a meeting of the Union Cabinet chaired by Modi and intended to liberalise and simplify the FDI policy to provide ease of doing business, drew sharp criticism from both the opposition and trade bodies.
However, the government contended that the move would “lead to larger FDI inflows contributing to growth of investment, income and employment”.
Wednesday’s decision marked a key change in the aviation industry where the government had already allowed up to 49 per cent FDI in private carriers. There was a restriction that foreign airlines could not invest in the loss-making Air India.
“It has now been decided to do away with this restriction and allow foreign airlines to invest up to 49 per cent under approval route in Air India subject to the conditions that foreign investments in Air India including that of foreign airlines shall not exceed 49 per cent either directly or indirectly,” an official statement said.
The Cabinet also approved 100 per cent FDI in single brand retail trading, tweaking its present policy of allowing only 49 per cent foreign investment in the sector through automatic route and the rest through government approval. It also gave five-year holiday for foreign investors from the mandatory 30 per cent of local purchases.
But after that, they will be required to meet 30 per cent of sourcing norms directly towards its India operations on an annual basis. The Cabinet also decided to allow 100 per cent FDI in construction development relating to building townships, housing, infrastructure and real estate broking services.
“It has been decided to clarify that real estate broking service does not amount to real estate business and is therefore eligible for 100 per cent FDI under automatic route.”
Making changes in the sector relating to power exchanges, the government removed the restrictions on investment by foreign institute investors and portfolio investors to invest in power exchanges through primary market as well.
Under the present policy, FII and FPI purchases were restricted to secondary market only.
The Congress and the CPM slammed the government move on Air India, saying it would only lead to the national carrier going into the hands of a foreign airline.
Pervez Damania, a former Director of the now defunct Kingfisher Airlines, welcomed it saying the “government has no business to be in flying”.
PN Vijay, a market analyst, said the decision was “not good enough”. “It should be 100 per cent FDI in Air India.”
On allowing 100 per cent FDI through the automatic route in single brand retail, the CPM said the move portends the Modi government’s intentions of “moving towards allowing FDI in multi-brand retail trade”. It warned of grave consequences for the domestical retail trade.
Both Congress and the CPM reminded the BJP that it had opposed the entry of foreign companies into retail trade earlier and it has now “hypocritically reversed its position”.Calling it a “serious matter” for small businesses, the Confederation of All India Traders (CAIT) strongly opposed the FDI in single brand retail.
Modi will be the first Prime Minister after 20 years to participate in the annual World Economic Forum show in Davos where world leaders and top industrialists and businessmen meet. — IANS