The government has decided to treat Persons of Indian Origin at par with Non-Resident Indians with regard to investments in domestic aviation.
As a result, PIOs will be kept out of the foreign direct investment ceiling, which will enable them to have 100 per cent equity in a domestic airline. This throws open the doors of Indian aviation to a new set of potential investors.
The status of PIOs had driven a wedge among concerned government departments. The department of economic affairs and the civil aviation ministry had said that PIO investments should be treated as FDI, while the department of industrial policy and promotion had favoured equal status for PIOs and NRIs.
But the finance ministry has just communicated to the civil aviation ministry that the term NRI will include PIOs with regard to investments in civil aviation.
By giving PIOs the same status as NRIs, the government has given a take-off signal to Nira Radia's Magic Air. The application of Radia, who is a PIO and holds 60 per cent of the airline's equity, had been blocked due to stands taken by the department of economic affairs and the civil aviation ministry. Official sources said Magic Air would soon get a no-objection certificate.
The commerce ministry has, from the beginning, held that PIOs should be treated at par with NRIs.
The finance ministry has now taken the view that PIOs who have been granted dual citizenship, are a subset of NRIs.
Civil aviation ministry sources said amendments would be made in the existing policy and clarifications brought before the Cabinet. The ministry had hitherto taken the stand that the FDI in Magic Air had pierced the regulatory ceiling of 49 per cent.
The government raised the FDI cap in the domestic aviation sector from 40 per cent to 49 per cent in November 2004, when the Cabinet also allowed 100 per cent investment by NRIs in Indian carriers. But the Cabinet had not taken a call on the status of PIO investments.
While considering the FDI norms proposed by the civil aviation ministry in November last year, the Cabinet had observed that the issue of PIO card-holders being accorded parity with NRIs in case of FDI should be examined in a time-bound manner. The Cabinet had asked the department of economic affairs for its views on this issue.
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