Cabinet clears 49% investment through FDI route in Air India

New Delhi: The Union Cabinet on Wednesday cleared 49 percent investment through FDI route in Air India. After the approval foreign airlines will now be allowed to invest up to 49 percent under approval route in the debt-laden national carrier.

However the investment will be subject to the conditions that the foreign investment in Air India including that of foreign Airline shall not exceed 49 percent either directly or indirectly.

While allowing foreign airlines to have stake in Air India, the government has also made it clear substantial ownership and effective control of Air India shall continue to be vested in Indian National.

Earlier, foreign airlines were allowed to invest under government approval route in the capital of Indian companies operating scheduled and non-scheduled air transport services, up to the limit of 49 percent of their paid-up capital.

The provision was not applicable to Air India.

Meanwhile, the Parliamentary Standing Committee on Transport, Tourism and Culture yesterday concluded that the government should review its decision to privatise or disinvest Air India and explore the possibility of "an alternative to disinvestment of our national carrier which is our national pride".

The panel is also understood to have concluded that the equity infusion in the national carrier, as part of the turnaround plan (TAP), was made on a "piece meal basis", adversely affecting its financial and operational performance and "forcing" the airline to take loans "at a higher interest rate to meet the shortfall".

A group of ministers is in the process of finalising the contours for the proposed strategic stake sale in the national carrier and expression of interest is likely to be invited from bidders soon. The national carrier is staying afloat on taxpayers' money.

Last year, the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle nod for the strategic disinvestment of the airline.

Under a turnaround plan approved by the previous UPA regime, Air India is to receive up to Rs 30,231 crore from the government subject to meeting certain performance thresholds. The ten-year bailout package began from 2012.