By IANS
New Delhi : The aviation industry has welcomed the government’s move to raise foreign equity limit in cargo and non-scheduled operations but opinion is divided on the ban on foreign carriers from holding stakes.
“The revision in equity limit was very much required for the growth of India’s aviation sector,” said Kapil Kaul, the chief executive for the India chapter of industry think tank, Centre of Asia Pacific Aviation.
“It is strategically important also,” Kaul told IANS, after the union cabinet Wednesday decided to raise foreign equity caps in cargo, non-scheduled and chartered operations to 74 percent from the existing 49 percent.
The meeting, presided over by Prime Minister Manmohan Singh, however, kept the cap on air transport services, or scheduled operations, at 49 percent, even as the ban on equity participation by foreign carriers continued.
In the case of ground-handling services, up to 74 percent foreign equity will be allowed, with 100 percent for non-resident Indians. For maintenance, repairs and overhaul operations, 100 percent foreign equity has been permitted.
Similar equity limit was allowed for flying training institutes, technical training institutions and helicopter and seaplane services, but with the prior approval of the regulator, the Directorate General of Civil Aviation.
“India is the only country which differentiates between funding by foreign institutions and foreign airlines,” Kaul said, reacting to the decision not to permit foreign carriers to hold equity in their domestic counterparts.
“We cannot understand why the government can’t allow foreign airlines to participate in equity. This cannot be logically rationalised,” he added.
But some domestic airline companies felt the ban must continue to give some more time to domestic players, which are already reeling under pressures on account of high fuel prices and cost of maintenance, to face future competition.
In the decision taken by the cabinet, non-resident Indians were allowed 100 percent equity in all areas of aviation industry, including scheduled, chartered and non-scheduled operations.
According to Siddhanta Sharma, chief executive officer of budget carrier Spice Jet, the decisions taken by the cabinet will go a long way in promoting India’s airline industry at a broader level.
“The decision will remove impediments to the growth of India’s aviation industry and promote a healthy growth of the sector,” he added.
Kaul said with 400-plus new aircraft expected to join the country’s aviation space over the next few years, the decision to allow additional foreign equity in maintenance, repairs and overhaul units will give a new push to its growth.