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"The Civil Aviation Ministry has proposed 24 per cent investment by foreign airlines. The Cabinet is likely to take a call on the issue in a couple of weeks," official sources said here. Asked about the Department of Industrial Policy and Promotion (DIPP) proposing a 26 per cent cap, they said, "Whatever decision the government takes, everyone will have to accept".
Foreign Direct Investment (FDI) up to 49 per cent is now allowed in domestic airlines, but the policy currently bars foreign airlines from investing in them primarily on security grounds. A 26 per cent cap would allow a foreign investor to have voting rights in the board of an Indian carrier which is not allowed if the cap is 24 per cent.
While the DIPP feels that allowing foreign airlines to invest in domestic carriers would help them raise the much- needed equity, it does not find support among many Indian airlines which feel that fledgling carriers would be susceptible to hostile takeovers as they were passing through a difficult financial situation.
