The government will in a year or two review its policy that bans foreign airlines from picking up equity stakes in domestic carriers, Civil Aviation Minister Praful Patel said in New Delhi on Tuesday.
"The present policy does not allow it, but this is not sacrosanct. It may be reviewed in a year or two. It is an ongoing process. Let domestic airlines fly to other countries, let Indian Airlines and Air-India be strengthened first," Patel told newspersons.
Last month, the government had raised the foreign equity cap in domestic airlines from 40 per cent to 49 per cent in an attempt to boost investment in the sector. But it had turned down a finance ministry proposal to allow foreign carriers to invest in domestic airlines on the grounds that it would provide a backdoor entry to foreign carriers in the domestic aviation sector.
The investment doors, however, were not always closed. In its 1990 Open Skies Policy the government had allowed international carriers to invest in domestic carriers, following which Gulf Air and Kuwait Air had each taken a 20 per cent stake in Jet Airways.
But this policy was changed in 1994-95 and foreign airlines were barred from investing in domestic carriers. As a result, both Gulf Air and Kuwait Air had to divest their stakes in Jet in favour of the Indian promoter, Naresh Goel.
Even after the policy was changed, foreign airlines have more than once shown interest in buying into domestic carriers.
Lately, the Richard Branson-controlled Virgin Blue was in talks with the GR Gopinath-promoted Air Deccan to pick up a stake in the low-cost carrier. But the talks fell through because of the policy impediment. In the 1990s, Singapore Airlines had lobbied hard for a stake in Air-India.
Patel's statement comes at a time when the domestic carriers are opposed to foreign carriers investing in India. They had recently petitioned the government that such an investment was not required, as it would not add any value to domestic aviation.
"We really do not need international carriers to invest in Indian carriers. It actually does not add any specific value to the industry as we have enough managerial and operational expertise," said an executive at a domestic private carrier.
The proposal is also likely to meet with opposition from the Left parties. The Left had agreed to the foreign direct investment limit in domestic carriers being raised to 49 per cent from 40 per cent on the condition that international airlines not be allowed to invest in Indian carriers.
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