The decision to allow foreign airlines to buy stakes in domestic carriers may be delayed again. Apparently, mindful of the political opposition the decision might invite, Prime Minister Manmohan Singh has urged a fresh round of talks before the move is sealed by the Cabinet Committee on Economic Affairs (CCEA).
Even as the final Cabinet note was already prepared by the government, the decision was deferred in the CCEA meeting last week due to strong opposition, both from within and outside the government. It seems the prime minister has asked Finance Minister Pranab Mukherjee, Civil Aviation Minister Ajit Singh, Commerce & Industry and Textile Minister Anand Sharma and Home Minister
P Chidambaram to come to a “solid conclusion” before such a far-reaching policy change is undertaken, said a senior official in the ministry of commerce & industry, on the condition of anonymity.
The official said there was still no absolute agreement on how much stake foreign airlines would be allowed to pick acquire. While the ministries of civil aviation and finance are strongly supporting a cap of 49 per cent through the automatic route, the commerce ministry is in favour of a 26 per cent one, while the home ministry is not comfortable with the automatic route and wants proper scrutiny of players who want to enter the market. The Planning Commission has also admitted there was no agreement on this issue within the government.
Another reason why the new round of talks has been called is because once the decision goes through, it is bound to invite severe wrath from various political quarters, which includes stiff opposition from West Bengal chief minister Mamata Banerjee.
The government had already faced quite a setback when it tried to liberalise foreign direct investment (FDI) norms for the multi-brand retail sector. “It does not want the same mistake to happen again,” said the official.
Hence, the government is leaving no stone unturned in building consensus within the party and then, getting it passed through the Cabinet. However, the talks would not happen before the end of next week, as both Mukherjee and Sharma are abroad, attending international events.
According to norms, foreign airlines are barred from picking up stake in Indian carriers due to security reasons, though foreign investors not related to aviation business are allowed to hold a total stake of 49 per cent. The decision to allow foreign airlines such as Emirates, Lufthansa, British Airways and Etihad to invest in domestic carriers was taken to save the cash-hungry Indian aviation sector, reeling under the multiple problems of soaring fuel costs, swelling debts, high taxes and cut-throat competition.
Allowing FDI in aviation would not only bring capital into the Indian aviation sector, it is also expected to bring international technical know-how and global expertise.
The move is anxiously awaited, particularly by Kingfisher Airlines, SpiceJet and GoAir, which need fresh funding to stay afloat. Kingfisher Airlines chairman Vijay Mallya had met Anand Sharma last week to push the decision.
