January 11, 2012 / 2:30 PM / in 6 years

India to decide soon on FDI in airlines - report

Jan 11 (Reuters) - The Indian cabinet will soon consider whether to let foreign airlines buy stakes in Indian airlines, the Press Trust of India reported, quoting the country’s civil aviation minister.

India bars foreign airlines from owning stakes in Indian carriers. Other foreign investors are allowed to invest in Indian airlines as long as the total does not exceed 49 percent.

“Finally, the Cabinet will take the decision,” Ajit Singh was quoted as saying in the report on Wednesday. “The Committee of Secretaries has already recommended raising the FDI (foreign direct investment) limits in the sector.”

A group of ministers will meet shortly to take a decision on the issue, he said.

Under Singh’s predecessor, Vayalar Ravi, the civil aviation ministry had proposed allowing foreign airlines to invest less than 26 percent in Indian carriers.

Last week, the Economic Times newspaper reported that the ministry was likely to drop its opposition to higher investment by foreign airlines and agree to let them hold up to 49 percent.

The higher permissable investment would come as a lifeline to India’s struggling carriers, notably debt-laden Kingfisher Airlines, which is struggling to raise funds.

Shares in all three listed airlines -- Jet Airways, Kingfisher and SpiceJet -- ended up 5-7 percent after the minister’s comments.

Singh ruled out a government bailout of any private airline, saying private airlines should come up with workable business plans and then seek loans from banks.

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