India Mulling Foreign Carriers Buying Stakes
February 20, 2009
The Indian government is studying a proposal to allow foreign carriers to buy stakes in domestic airlines, the civil aviation minister said on Friday, to help companies facing a cash crunch.
"The consultation process is still on and we can't give a time line for it," Praful Patel told reporters on the sidelines of a function at Mumbai airport.
Indian carriers can have foreign holdings of up to 49 percent, including portfolio and direct investment, but foreign airlines are not allowed to invest.
A global credit crunch has made fund raising difficult for Indian carriers and analysts have forecast them to collectively post losses of INR80 billion rupees (USD$1.6 billion) for the financial year ending in March.
"I don't think at this point giving direct financial concessions or assistance is possible. Short of writing a check, anything which can be done in terms of policy measures, we will do," Patel said.
Kingfisher Airlines, controlled by Indian tycoon Vijay Mallya, has requested the government to let foreign airlines pick up stakes of up to 25 percent in Indian carriers.
"We would certainly want to help the industry," Patel said, adding that allowing foreign direct investment by foreign carriers was an option under consideration of the government.
The minister also said the government would take action if there was evidence of a cartel, adding that watchdog Monopolies and Restrictive Trade Practices Commission was investigating a fare increase by airlines last week.
"Cartelization will not be allowed and we will come down heavily on it," Patel said.
Civil aviation regulator Directorate General of Civil Aviation (DGCA) had written to airlines on the matter, and some of them had replied, he said. "If there is an issue DGCA will take appropriate action."
Domestic carriers such as SpiceJet, Kingfisher Airlines, Jet Airways and Air-India have since rolled back the fare increase.
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