India to allow 74% FDI in cargo by 2007

Civil Aviation Minister Praful Patel today said the government would raise the foreign direct investment ceiling in air cargo and non-scheduled operations to 74 per cent from the current 49 per cent, by 2007.

"India will look up to hiking the FDI ceiling in the two sectors by 2007," Patel said while addressing the International Air Transport Association seminar on cargo in emerging markets.

"We have not even scratched the surface of the air cargo business, and cargo infrastructure needs to be greatly enhanced," he said.

Patel said state-run carriers Air-India and Indian Airlines would also enter the cargo business shortly.

When asked why 74% FDI was not being allowed in passenger aviation sector, Patel said, "We would like our carriers to consolidate their position first and then we will look into opening up the sector further".

Patel said the government will set up a cargo hub in Nagpur to give a fillip to cargo business in the country.

"We have chosen Nagpur as it is centrally located. The cargo hub will be set up through a joint venture and the JV partner will be finalised through a global tender," Patel said.

Additional land is being provided near the Nagpur airport for the proposed cargo hub.

He said volumes will drive the cargo business in the country. "It is not a country but a continent, one sixth of humanity lives here and growth in the cargo business will be volume driven," Patel said.

Regarding the airport infrastructure, Patel said the first phase of upgradation would be complete by 2010.

"We will have the first phase of upgradation and modernisation of all the four metro airports and 35 non-metro airports completed by 2010," Patel said. State-owned carriers will also venture into the cargo business shortly, he said.

Indian Airlines has already sent five of its Boeings 737s that were earlier with its subsidiary Alliance Air to be converted into freighter aircraft.