In a step towards strategic divestment in State-owned Air India, the Union Cabinet on Wednesday green-lighted a proposal to let foreign airlines own up to 49 per cent in the loss-making national carrier. Such investments will require prior approval.
To this end, the Cabinet removed a restriction that barred global airlines from owning shares in Air India; foreign carriers are already permitted to hold up to 49 per cent in private Indian airlines.
However, the decision comes with riders. Firstly, investment in Air India, including any by foreign airlines, should not exceed 49 per cent, directly or indirectly. Secondly, substantial ownership and effective control will be vested in an Indian national.
Currently, 100 per cent foreign investment is allowed in Indian airlines; foreign carriers are permitted to hold a 49 per cent stake in these airlines.
Such investments go through the automatic route, meaning, no prior approval is required.
Single-brand retail
The Cabinet also approved 100 per cent FDI under the automatic route for single-brand retail trading (SBRT). In addition, it has allowed foreign institutional investors to invest in power exchanges in the primary market. The Cabinet also clarified that ‘Real Estate Broking’ is eligible for 100 per cent FDI under the automatic route. It has also stipulated joint audits in certain Indian investee companies.
These relaxations in the Centre’s FDI policy come days before Prime Minister Narendra Modi and several of his senior Cabinet colleagues are to attend the World Economic Forum’s annual gathering of political and economic elite at Davos in Switzerland.
The relaxation in FDI policy in single-brand retail includes allowing 100 per cent FDI under the automatic route, and providing five-year relief from the 30 per cent local sourcing norms.
Prior to the latest change, FDI in SBRT beyond 49 per cent and up to 100 per cent required government approval. FDI up to 49 per cent was under the automatic route.
Goldie Dhama, Partner (Regulatory), PwC India, said the liberalisation in SBRT is a “progressive move” that would improve the ‘ease of doing business’ in India and stimulate foreign investment.
Malav Virani, Partner, MDP & Partners, a law firm, said opening up SBRT through the automatic route would further expedite the FDI clearance process and make investment in India an even more enticing prospect. “This is a positive move and in the long-run will attract more funds from abroad,” Virani told BusinessLine .
Congress unhappy
Principal opposition party Congress criticised the move, and said it would harm manufacturing and traders in India.
“As BJP Govt allows 100 per cent FDI in Single Brand Retail by doing away the requirement of 30 per cent sourcing through ‘Make in India’, PM & FM’s duplicity & doublespeak stand exposed. Modiji’s professed ‘harm of manufacturing & traders’ & Jaitleyji’s ‘last breath’ have proved to be ‘Jumlas’!(sic),” tweeted the party’s chief spokesperson, Randeep Singh Surjewala.