Cabinet Approves 49% FDI in Air India

Air India is expected to report a net loss of Rs 3,579 crore for 2017-18, according to budget estimates.

(Photo: PTI)

India allowed 49 percent foreign direct investment in Air India as the government looks to sell part of its stake in the debt-ridden state-run carrier that’s staying afloat on a government bailout.

Asia’s second-largest economy allows foreign airlines to hold up to 49 percent stake in Indian carriers with the exception of Air India.

That restriction has now been lifted by the cabinet, according to a government press statement. A substantial ownership and effective control of Air India will remain with Indian nationals, it said.

The move will not make much of a difference for the airline given the “issues” it has been facing, KN Shrivastava, former aviation secretary, told BloombergQuint.

Given the kind of debt burden it has, one doesn’t know if there will be prospective investors interested to pick up 49 percent stake in Air India. A part of the debt has to be taken over by the Government of India. Only then investors will be interested.

KN Shrivastava, Former Aviation Secretary

Air India had a total debt of about Rs 48,877 crore at the end of March 2017. The government has infused Rs 26,545 crore into the airline in five years, Minister of State for Civil Aviation Jayant Sinha said in response to a question in the Rajya Sabha.

A group of ministers tasked with finding ways to explore state-run Air India’s divestment has decided to create a separate entity to pool in working capital loans and non-core assets of the national carrier.

The airline is expected to report a net loss of Rs 3,579 crore for 2017-18, according to budget estimates, compared to a provisional net loss of Rs 3,643 crore for 2016-17.

It is projected to increase operating profit to Rs 531 crore from Rs 215 crore in the previous year, as per latest numbers tabled in Parliament.

(This story was originally published on BloombergQuint and has been reposted with permission.)

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