A fortnight before the finals bids for Air India are to be submitted, the Union government on Wednesday amended the foreign direct investment (FDI) policy by allowing non-resident Indians (NRIs) to own 100% stake in the flag carrier.
Clearly this is another attempt by the government to sweeten the deal for buyers interested in Air India. In January, as part of Air India’s sale, the government said that it would absorb almost two-thirds of the airline’s debt of ₹62,000 crore.
Till date, the FDI policy allowed NRIs to own and operate private airlines—Naresh Goyal started erstwhile Jet Airways in 1992, while the now defunct Kingfisher Airlines was started in 2005 by Vijay Mallya.
However, there was a cap on FDI in government-owned Air India, where foreign airlines and NRIs could own up to 49% stake. Even now, foreign airlines and entities can’t own more than 49% stake in any Indian airline.
“In light of the proposed strategic disinvestment of 100% of M/s Air India Ltd by the Government of India, M/s Air India Ltd will have no residual government ownership and will be completely privately owned, it has been decided that foreign investment in M/s Air India Ltd be brought on a level playing field with other scheduled airline operators,” read a statement issued by the government. “The amendment in FDI policy will permit foreign investment in M/s Air India Ltd at par with other scheduled airline operators i.e. up to 100% in M/s Air India Ltd by those NRIs, who are Indian nationals,” it added.
The Tata group, which already owns majority stakes in AirAsia India and Vistara, is said to be toying with the idea of buying Air India. Incidentally, Air India was started in 1932 by J.R.D Tata and was then known as Tata Airlines.
In a bid to shore up its finances and attract investments into the country, the government has been consistently revising the FDI policy across sectors such as defence, construction development, trading, pharmaceuticals, power exchanges, insurance, pension, other financial services, asset reconstruction companies, broadcasting, single brand retail trading, coal mining, and digital media.
“These reforms have contributed to India attracting record FDI inflows in the recent past. FDI inflows in India stood at $ 45.15 billion in 2014-15 and have consistently increased since then,” read the government statement. It added that India registered its highest ever FDI inflow of $62 billion (provisional figure) in the financial year 2019.