Cabinet approves 100% FDI by NRIs in Air India to push privatisation

March 4, 2020

New Delhi: In a bid to push privatisation of Air India, the Union Cabinet on Wednesday cleared a proposal for 100 per cent FDI in the sale-bound airline by NRIs.

The investment has been permitted through the automatic route.

Union Information and Broadcasting Minister Prakash Javadekar said at a press conference here that the Cabinet, at a meeting chaired by Prime Minister Narendra Modi, had decided to increase the maximum stake for NRIs from 49% to 100%.

The government is in the process of selling the national carrier, and has invited preliminary bids recently.

As per the present FDI Policy, 100% FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic upto 49% and Government route beyond 49%). However, for NRIs 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline.

The government had on January 27 invited expression of interest (EoI) from prospective buyers of Air India and two of its subsidiaries. Along with Air India and its low-cost subsidiary Air India Express, the flag carrier’s 50 per cent stake in ground-handling arm AISATS has also been put on the block.

The last date for submitting the EoI is March 17. The government will make public the names of short-listed bidders in the first round of bidding by March 31.

Above amendment to the FDI Policy are meant to liberalise and simplify the FDI policy to provide ease of doing business in the country, leading to largest FDI inflows and thereby contributing to growth of investment, income and employment, a an official release later said.

An expression of interest (EoI) from prospective buyers of Air India and two of its subsidiaries had been invited by the Government in January. Along with Air India and its low-cost subsidiary Air India Express, the flag carrier’s 50 per cent stake in ground-handling arm AISATS has also been put on the block.

The last date for submitting the EoI is March 17. The government will make public the names of short-listed bidders in the first round of bidding by March 31.

In its second attempt to sell Air India lock, stock and barrel, the Narendra Modi government has sweetened the deal by substantially reducing the debt on the books of the airline and offering complete 100 per cent stake in the loss-making airline.

As per preliminary information memorandum (PIM) inviting the EoI, Air India is one of the most extensive flight service providers in India with network coverage of 98 destinations – 56 domestic destinations with around 2,712 departures per week and 42 international destinations with around 450 departures per week.

The airline offers 75 additional destinations through its secondary network of code share operations covered under 25 code share agreements with foreign carriers.

During FY 2019, Air India carried around 22.1 million passengers and recorded operational revenues of Rs 25,508 crore.

While the government has shown its determination to exit Air India this time, many opposition parties have opposed the decision. One of the ruling BJP’s key members Subramanian Swamy has also objected to the plan and has warned the government against the move.