Thumbs down from the government for Mallya's FDI proposal
27 Sep 2008
New Delhi/Mumbai: With Kingfisher Airlines promoter,Vijay Mallya, creating a splash in aviation industry circles with a statement that he had made a formal request to the government to allow at least 25 per cent foreign direct investment (FDI) in domestic carriers, the government has now responded informally by saying that no such proposal was likely to be taken up for consideration.
Government officials said that no FDI would be allowed for well established reasons. ''We have no knowledge of any such letter written by Mr Mallya. However, the ministry's stance is the same. The Indian civil aviation industry is still at a nascent stage and foreign airlines will not be allowed to pick up stake in any Indian carrier,'' an unamed civil aviation ministry official has been quoted as sayin g in the media.
In a conversation with national business daily, Business Standard, Mallya said, ''All airlines, whether Jet Airways, Air India or Kingfisher Airlines, will benefit from such a move. The government should let it happen now.''
Current policy caps FDI in the domestic aviation industry at 49 per cent, barring sectors like cargo, maintenance repair and overhaul (MRO), and ground-handling at airports. It also does not allow direct or indirect investment by foreign carriers.
The draft aviation policy, under consideration by a Group of Ministers (GOM) headed by external affairs minister Pranab Mukherjee, does not mention changes in FDI limits on scheduled airline companies. Mallya's request would have to be incorporated as part of the policy draft, if it is to see light of day.
Fresh reports today suggest hat even Naresh Goyal-promoted Jet Airways may lend support to Mallya's demand.
At an industry level, while respected consultants such as Centre for Asia Pacific Aviation (CAPA) have recommended that investment by foreign carriers in Indian airline companies will help ''bring in the much-needed strategic investment and expertise,'' other consultants point out that alliances and interline agreements already allow domestic airlines a lot of strategic advantage.