Aviation ministry backs 49 per cent FDI in Indian carriers

The civil aviation ministry will prepare a cabinet note on allowing foreign airlines to invest up to 49 per cent in Indian carriers, aviation minister Ajit Singh said after a meeting of senor cabinet ministers in the capital today.

The meeting was attended by the group of ministers, including newly inducted civil aviation minister Ajit Singh, finance minister Pranab Mukherjee, petroleum minister S Jaipal Reddy and commerce minister Anand Sharma.

At present, the government allows foreign participation of up to 49 per cent in Indian airlines, but it does not allow foreign airlines to buy stakes in domestic carriers.

The government has to make a final decision on the FDI issue as it is seen as crucial to the survival of the fledgling domestic airlines, most of which are deep in the red amidst rising costs of operation and are in dire need of cash infusion.

Several international airlines such as British Airways, Singapore Airlines and Air Asia, had, in the past, shown interest in investing in Indian carriers but have been discouraged by the country's FDI policy that does not permit foreign airlines buying stakes in Indian carriers.

Air passenger traffic in India has grown at 18 per cent in 2011 and an expected 15 per cent growth in the current year. Airfares have also seen a steep climb of over 15 per cent, in the wake of a continued rise in aircraft turbine fuel (ATF) prices as well as other operating costs for airlines.