Govt mulls diluting FDI rules ahead of Air India sell-off

New Delhi: Seeking to ensure aviation biggies' participate in the bidding for Air India sale, the government may dilute substantial ownership and effective control (SOEC) clause in the FDI guidelines for the airline sector.

Official sources said the Department for Promotion of Industry and Internal Trade (DPIIT) has been discussing the proposal with administrative Civil Aviation Ministry.

The present FDI rules allow up to 100% FDI in domestic carriers but the investment by a foreign airline is capped at 49%. Further, substantial ownership and effective control has to be in the hands of Indians.

In most of the aviation-related activities such as ground-handling, greenfield airports and Maintenance, Repair, Overhaul (MRO), FDI is allowed up to 100% through automatic route. Relaxation in FDI rules for airlines may help generate interest among foreign players keen to get a foothold in the Indian market.

As the government's bid to sell majority 76% stake in Air India failed last year with not a single private firm showing interest, the dilution in FDI norms could encourage foreign airlines and other investors to participate in the bidding this time.

"We would make sure that disinvestment of Air India happens this time. All necessary steps would be taken. The issue of relaxing FDI guidelines has been there. We are examining it," said a government official.

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