This Article is From Mar 04, 2020

NRIs Can Now Own 100% In Air India Via Automatic Route

Union minister Prakash Javadekar said the Cabinet has approved the decision to raise the limit from the current 49 per cent.

NRIs Can Now Own 100% In Air India Via Automatic Route

Government allows NRIs to acquire up to 100 per cent stake in Air India through automatic route.

Highlights

  • Government NRIs to acquire up to 100% Air India through automatic route
  • Decision comes at a time when government is looking to sell Air India
  • Successful bidder would have to take over debt of Rs 23,286 crore

The government on Wednesday permitted non-resident Indians (NRIs) to acquire up to 100 per cent stake in disinvestment-bound Air India through the automatic route. Briefing the media, Union minister Prakash Javadekar said the Cabinet has approved the decision to raise the limit for NRIs to own stakes in the public carrier from the current 49 per cent.

"Regarding the strategic sale of Air India, Non-resident Indians (NRIs) can now acquire 100 per cent stake in the airlines. Earlier it was 49 per cent," he said.

The decision comes at a time when the government is looking to sell 100 per cent stake in the national carrier and has set a 17 March deadline for submitting bids.

According to news agency PTI, permitting NRIs to own 100 per cent in the carrier will not be in violation of Substantial Ownership and Effective Control (SOEC) norms as this would be treated as domestic investments. Under the SOEC framework, which is followed in the airline industry globally, a carrier that flies overseas from a particular country should be substantially owned by that country's government or its nationals.

As per the existing norms, 100 per cent FDI is permitted in scheduled domestic carriers, subject to certain conditions, including that it would not be applicable for overseas airlines. In the case of scheduled airlines, 49 per cent FDI is permitted through automatic approval route and any investment beyond that level requires government nod. 

On 27 January, the government came out with a Preliminary Information Memorandum (PIM) for Air India disinvestment. It  proposed selling 100 per cent stake in Air India along with budget airline Air India Express and the national carrier's 50 per cent stake in AISATS, an equal joint venture with Singapore Airlines.

Under the latest disinvestment plan, the successful bidder would have to take over only debt worth Rs 23,286.50 crore while the liabilities would be decided depending on current assets at the time of closing of the transaction. This is the second attempt by the government in as many years to divest Air India, which has been in the red for long.