Allowing FDI
into aviation sector is good move
Central
Government is aiming at making India the most open economy in the world for FDI. The focus is particularly on the civil aviation sector. Raising the FDI limit for airlines to 100 per cent, with automatic approvals
for foreign ownership up to 49 per cent, sounds good.
In theory, a
foreign airline could tie up with other institutional investors like private
equity funds to form a 49:51 joint venture and tap India’s double-digit air
traffic growth. It will require an airline’s
chairman and at least two-thirds of its directors to be Indian citizens, and
substantial ownership and effective control to be vested in Indian nationals.
If you compare
India with other countries, the U.S. now allows around 25 per cent foreign
ownership in airlines, South Korea permits 49 per cent and Chile a full 100 per
cent.
By allowing FDI
into aviation section sector, the government has thrown open invitations to
corporates. Now, the sector will be flooded by competitive industrialists to
occupy market shares and in the process ultimate consumers may be benefited
with cheaper air travel as well as alternative sources to choose. This may also
boost revenues for government as it can levy taxes on the aviation companies
operating in the country and using Indian air space.
The opening of
the aviation sector with 100 percent participation on internal flights through
automatic approval route indeed is a big ticket of reform and certainly will
increase traffic thrice by bringing even the ordinary people into the net of
air connectivity. At the same time limiting the individual investment at 49
percent of the overseas air operator with Indian top brass control is a fine
piece of hemming and the cautious strategy of regaining the driver seat at
times of emergency without legal snag is also welcome.
We
should not give a surrender throw of key sectors like aviation and defence with
high border vulnerabilities with clever and cruel neighbours like China and
Pakistan. Make in India is good coupled with the caveat safety India.
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