Government notifies changes in FDI norms on civil aviation; permits NRIs to own 100% stake of Air India

The government has notified changes in Foreign Direct Investment (FDI) norms on civil aviation today. It will permit non-resident Indian (NRIs) nationals to own 100 per cent stake of Air India.

The gazette notification comes amid the ongoing process of strategic disinvestment of Air India.

Last month, the government for the third time extended the deadline to bid for Air India. The deadline was extended due to the spread of COVID-19 pandemic, which has disrupted economic activities across the world. The deadline was extended by two months till August 31, 2020. The divestment process for the national carrier was initiated on January 27, 2020.

"These rules may be called the Foreign Exchange Management (Non-debt Instruments) (Third Amendment) Rules, 2020," the official notification dated July 27, 2020, said. They shall come into force on the date of their publication in the Official Gazette, it said.

The Official Gazette said, "Foreign investments in M/s Air India Limited, including that of foreign airlines, shall not exceed 49 per cent either directly or indirectly except in case of those NRIs, who are Indian Nationals, where foreign investments are permitted up to 100 per cent under the automatic route." It added, "Substantial ownership and effective control of Air India Limited shall continue to be vested in Indian Nationals as stipulated in Aircraft Rules, 1937."

As per the present FDI Policy, 100 per cent FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic up to 49 per cent and Government route beyond 49 per cent).

However, for NRIs 100 per cent FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline.

The government permits 100 per cent FDI under automatic route in helicopter services/seaplane services requiring Directorate General of Civil Aviation (DGCA) approval.

Foreign airlines are allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent of their paid-up capital, subject to certain conditions.

The conditions include that inflow must be made under the government approval route and the 49 per cent limit will subsume FDI and FII/FPI investment.

The investments made would need to comply with the relevant regulations of the Securities and Exchange Board of India (Sebi), it said.

Earlier in March, the Union Cabinet approved a proposal to permit foreign investment up to 100 per cent by those NRIs, who are Indian Nationals, in case of Air India.