The review of the foreign direct investment (FDI) policy by the union
cabinet has some real good news for the tourism and the aviation sectors.
The same will also lead to further liberalisation as NRI investments
would be allowed up to 100 per cent on the automatic route. According
to the revived policy, the civil aviation sector will allow FDI up to
74 per cent on the automatic route for non-scheduled airlines, charter
airlines and cargo airlines with no direct or indirect participation
by foreign airlines in non-scheduled airlines and charter airlines.
This liberalised FDI will also apply to ground handling services subject
to sectoral regulations and security clearance. Explaining the same,
Kiran Yadav, an aviation analyst and managing director, Aerobiz India
says, "As far as non-scheduled airlines, charter airlines and cargo
airlines are concerned, allowing 74 per cent FDI is an opportunity for
the opening up of the market which hadn't taken off per se. With few
players and a long gestation period for the capital invested in these
markets, it takes people with big pockets and a mindset to sustain.
Indians will be a bit hesitant to invest in these sectors, hence getting
support of somebody willing to struggle."
The industry too, welcomed this initiative. Subhash Goyal, chairman,
aviation and tourism committee, Indian Chamber of Commerce adds, "This
will give a big boost to tourism as far-flung areas can now become accessible
through charters and helicopters." When asked if India is ready
with the basic infrastructure to encash on this new policy? Goyal said,
"Necessity is the mother of invention. With the government approval,
investors will come forward to invest in the infrastructure heavily."
The sector is now poised to attract around US$ 50 to US$ 70-billion
investments over the next few years.
However, FDI cap at 49 per cent on the automatic route and 100 per cent
for NRIs, subject to no direct or indirect participation by foreign
airlines and reclassifying it, as domestic scheduled passenger airline
sector remains unaltered thereby deterring Sir Richard Branson and Tony
Fernandes of Virgin Atlantic Airways and AirAsia respectively from starting
their domestic airlines from India. Mentions Kapil Kaul, CEO, Indian
Subcontinent and Middle East, CAPA (in its newsletter), "The revision
in equity limit was very much required for the growth of India's aviation
sector. However, India is the only country which differentiates between
funding by foreign institutions and foreign airlines. This cannot be
logically rationalised."
