Cabinet note moved on FDI in aviation

New Delhi: Before the proposal of allowing foreign airlines to buy stakes in domestic carriers is taken up by the Cabinet, Prime Minister Manmohan Singh is likely to consult senior ministers to build a consensus on the contentious issue, sources said.

"While the final cabinet note has been moved by the Department of Industrial Policy and Promotion (DIPP), the Prime Minister is likely to hold consultations among ministers for Finance, Commerce, and Home Affairs. Besides, he would also consult with Railways Minister Mukul Roy, who is from TMC, a key ally in the UPA government," they said.

It was West Bengal Chief Minister and TMC Chief supreme Mamta Banerjee who had forced the government to put on hold the decision to allow 51 per cent foreign direct investment (FDI) in multi-brand retail.

The commerce and industry ministry had moved a cabinet note to allow foreign carriers pick up equity in their Indian counterparts.

Finance Minister Pranab Mukherjee in his Budget speech had said that a proposal to allow foreign airlines to participate with up to 49 per cent in the equity of an air transport undertaking, engaged in operation of scheduled and non-scheduled air transport services, is under active consideration of the government.

At present, India allows foreign investors, not related in any way to airline business, to buy up to 49 per cent stake in domestic airlines, but foreign carriers are not permitted to invest in them.

Allowing foreign airlines to buy stake in domestic carriers is expected to benefit Kingfisher Airlines, which is burdened by a debt of over Rs 7,000 crore.

Accepting a major demand of the cash-strapped aviation industry, the government had in January launched the process for allowing FDI by airlines in the sector.

While Kingfisher has been strongly pitching for permission to allow foreign airlines to invest in domestic carriers, other major carriers like Jet Airways and the only profit-making airline, IndiGo are opposed to it.

There has been a mixed response to the issue so far, with even the Planning Commission, in its document on the aviation sector for the 12th Plan, acknowledging that there was no consensus on it.