In a bid to safeguard interests of ailing aviation sector, a Group of Ministers will meet later this week to give final touches on allowing investments in Indian carriers by foreign airlines, direct import of jet fuel by Indian carriers and Air India's financial restructuring plan.
The GoM meet on Thursday may also decide on the investment cap by foreign airlines in buying equity in Indian carriers, official sources said.
The GoM is also likely to take a decision on allowing Indian airlines directly import aviation turbine fuel to get some breather from the high sales tax regime imposed by state governments.
During the meeting, cash-strapped Air India's financial restructuring plan (FRP) and turnaround plan (TAP) would come up for a review and a decision on injecting additional equity into the national carrier is likely to be taken.
The debt-ridden carrier has outstanding loans and dues worth Rs 67,520 crore, of which Rs 21,200 crore is working capital loan, Rs 22,000 crore is long-term loan on fleet acquisition, Rs 4,600 crore is vendor dues besides an accumulated loss of Rs 20,320 crore, according to official figures.
Civil Aviation Minister Ajit Singh, after his meeting with Finance Minister Pranab Mukherjee on January 17, had said that he had discussed the issue with him and that he had expressed his agreement to it. His ministry is to prepare a note for the Cabinet. Singh had said
FDI was one of the factors which would help the industry to survive the current financial crisis. "We all know that the aviation industry is under a lot of stress. Allowing foreign airlines to pick up stake in Indian carriers would mark a major policy shift," Singh had said. Earlier, foreign airlines were not allowed to invest in Indian airlines though foreign direct investment of upto 49% was allowed.
A Committee of Secretaries has proposed a 49% cap on FDI by foreign airlines. But earlier, the Civil Aviation Ministry had suggested 24%, while the Department of Industrial Policy and Promotion (DIPP) had recommended 26%.
At present foreign investment of up to 49% is permitted in the aviation sector, apart from 100% in MRO (maintenance, repair and overhaul), airports, helicopter and sea-plane operations, but foreign carriers are not allowed to invest. The GoM would also take a call on allowing the airlines to directly import jet fuel, the sources said.
While the Civil Aviation Ministry is in favour of the demands raised by airlines like Kingfisher, the Petroleum Ministry is understood to have raised objections to the proposal.
Aviation industry sources said such a move would help the ailing airline industry avoid paying high sales tax imposed by the states, ranging from four% to 40%.
The expenditure on jet fuel accounts 40 to 50% of an airline's total operational cost. Regarding the airlines' demand to allow direct import of jet fuel, the Minister had said a Committee of Secretaries has recommended that direct import may be allowed. In that case, the airline companies would not have to pay sales tax.
The issue would also be placed before the GoM, which is also likely to consider the recommendation by a panel of secretaries to infuse Rs 23,000 crore into the cash-strapped national carrier over the next 10 years, of which Rs 6,600 crore could be injected in the current fiscal ending March 31.
As per its aircraft acquisition plans, Air India has already placed orders for 27 Boeing 787 Dreamliners and decided to take them on sale and leaseback mode.
The first of these planes are expected to be delivered by March. Under the leaseback mode, an airline purchases aircraft from the manufacturer and sells them to a leasing company and then gets the planes back on lease. This erases the aircraft purchase debt from the airline's books.
