The Centre is allowing 100% Foreign Direct Investment by NRIs in Air India.

 

New Delhi: The scope for the sale of the debt-ridden national carrier Air India has been widened with the Union government’s recent notification of allowing 100% Foreign Direct Investment (FDI) by NRIs into Air India.

The Ministry of Finance and the Ministry of Civil Aviation had together brought in this amendment in the FDI policy earlier this week with a hope that this would fast-track the sale of Air India. Sources in the Ministry of Civil Aviation said that they had been pushing hard for getting this amendment passed as they believed that this would help the national carrier find some buyers as repeated attempts to sell the airlines have remained futile over the past two years.

Officials in the Ministry of Civil Aviation that this correspondent spoke to also hinted that there were some buyers who were expressing their interest, but were not eligible due to the existing rules for buying stakes in an Indian airline.

“The government allowing 100% FDI in Air India certainly does not mean that this airline can be brought out by any foreign national or for that matter any foreign company. The 51% stake of the airlines will still remain with an Indian national which is why the rule has been amended to bring only NRIs,” a Ministry of Civil Aviation official told this correspondent.

According to the earlier norm, NRIs could own only up to 49% stake of the national carrier’s stake while the rest had to be owned by an Indian residing in India.

However, aviation experts believe that the exercise to sell Air India at a time when the global aviation industry is facing one of its biggest crisis will still remain futile as no individual or company would like to invest in an airline at this time which is already debt-ridden.

Jitender Bhargava, former executive director of Air India, told The Sunday Guardian that the new rule had definitely widened the scope for the sale of the national carrier, but the time at which it had been done is very worrisome. “Currently, the aviation industry across the world is going through a very difficult time with layoffs, salary cuts and downsizing of the fleets even by the giants, and as such it is very difficult for the government to find a prospective buyer. Nevertheless, it is a positive step by the government where the government is giving some relaxations in its terms for the sale of Air India. It shows that the government is committed towards the disinvestment of Air India. But what is more important is that Air India needs to be managed by a professional airline management company for its revival,” Bhargava said. A former joint secretary with the Ministry of Civil Aviation told The Sunday Guardian that the government and the ministry should first give Air India’s management contract to a professional airline which would help manage the airlines and bring back the “glorious days of the airlines”. The former joint secretary further said that “it is a positive and a welcome step that the government is trying to widen its scope for the sale of the airlines, but what remains to be understood is that the airlines needs to managed by professionals; we cannot have babus and IAS officers managing an airlines who have little understanding about the operations and marketing of airlines.”

“Air India remained a profitable airline till 2003-04, look at the turn of events in Indian aviation industry post that period. A particular airline was given profitable international routes earlier operated by Air India; rules of unions in Air India were never amended, several ministers and MPs never wanted the airlines to change its working structure to adapt to the needs of the time. But it feels positive to see that this government is making an effort to disinvest the airlines and give to somebody who can professionally manage it,” the former joint secretary said. Air India is currently under a debt of over Rs 58,000 crore with an annual forego of about Rs 4,000 crore.