 "FIA says relaxing FDI norms will have security implications")
Raising red flags over dilution of FDI norms for local carriers, the Federation of Indian Airlines (FIA) has said the decision would place domestic players at a disadvantage as well as have serious implications on national security.
FIA, whose members are IndiGo, SpiceJet, Jet Airways and GoAir, have been vociferous in their opposition against relaxation of foreign direct investment norms for airlines.
In a strongly-worded letter to the Civil Aviation Ministry, the grouping has suggested that any dilution in substantial ownership criteria for domestic carriers should be done only on a reciprocal basis.
Emphasising that dilution in the substantial ownership criteria should be applied strictly on a reciprocal basis, FIA said any unilateral concession by India would place the local carriers at a serious competitive disadvantage vis-a-vis their foreign counterparts.
As part of liberalising norms to overseas investments, foreign non-airline players can own up to 100 per cent stake in local carriers.
According to FIA, once foreign controlled airlines are established as Indian carriers, they would gain automatic access to defence airfields.
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Since an unfriendly foreign country can easily route its investment through other countries or through shell companies, allowing effective control to lie outside the country has "huge implications", it added.
FIA also noted that the amendment would enable a foreign airline, through its group companies to be able to own a domestic airline in India.
As per the grouping, changing from SOEC (Substantial Ownership and Effective Control) to Principal Place Business (PPB) in Air Service Agreements (ASAs) would impact capacity entitlements.
"Accepting PPB will also open the back door for entry by foreign airlines into India's lucrative domestic market at a time when the Indian carriers are still at a fairly nascent stage of their growth.
The grouping, which has legally challenged granting of Air Operator's Permit (AOP) to AirAsia and Vistara, cited that even the US and Canada, allow only 25 per cent of voting rights to foreign nationals and entities in their airlines.
"Foreign governments, including those of Singapore and Malaysia, do not allow airlines in India to set up subsidiaries in their countries. Therefore, it is not understood why India should extend them this courtesy," the December 30 letter said.