Branson's personal stake plan may not pass muster

Richard Branson's plan to invest in an Indian carrier in his personal capacity is likely to be blocked by the government.

According to a senior government functionary, since Branson controls a few airlines across the world, his investment in his personal capacity would entail an indirect investment by an airline, which is not allowed under existing rules.

Sources said the government has received advice not to entertain such a move as this would result in similar moves by other airlines across the world.

"Branson's investment is an investment by someone who controls many airlines across the world. This will be an indirect investment by an airline," said the functionary.

Last week, senior government officials had said that there was nothing in the rule book to stop Branson from investing in his personal capacity. Now, the government feels it would amount to a backdoor entry by a foreign airline.

Branson, who was in India two weeks back, had said that he will invest in domestic carriers in his personal capacity as he find that as an airlines operators he needed to be in the Indian market, which is growing at over 25 per cent per annum.

Branson also said that he was in talks with at least two Indian carriers, including the low cost carrier Air Deccan, for possible investment possibilities.

The present norms do not allow international carriers to invest in Indian airlines, but permit other corporate bodies such as funds to invest up to 49 per cent in the equity of a domestic carrier.

Air Deccan, was in talks with Branson's Virgin Blue for raising funds. But the talks were called off as the present norms did not allow international airline's investments in Indian carriers.

According to sources in case of an investment by any entity, the government will have to examine issues such as how the funds are routed and the source of the funds. Besides, the government will also not permit any control by other airlines run by him in the Indian venture.