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Indian government considering lifting ban on foreign airline investors in Air India

India’s government is mulling the possibility of making changes to the Foreign Direct Investment (FDI) norms that can help find more investors and open the process up for foreign entities looking to partake in the sale of national flagship carrier, Air India.

Though the final decision will be made following talks with transaction advisors, sources have relayed that the government may extend the FDI policy to permit foreign carriers to pick a 49% stake in Air India.

“We have various options on the table for the sale of Air India. No option would be finalized until transaction advisors views are taken,” revealed the official, who requested for anonymity.

Under existing regulations, foreign airlines can buy up to 49% in any Indian carrier except Air India, but non airline companies can completely own Indian carriers including Air India. However, the government owns discretionary power to amend foreign direct investment policy on a case by case basis for select state-run enterprises.

New Delhi believes adjusting FDI rules may open the route for a joint bid by domestic and international carriers that are looking to take a slice of the pie or even give government an option to maintain majority control.

India’s cabinet had given an in-principle consent for a calculated disinvestment in financially-strained Air India. A successful stake sale is expected to lift some weight off government’s resources, and free up tax payers’ money that can be directed to social welfare projects and infrastructure development, which offer wider economic gains.

Until now, InterGlobe Aviation, which operates local carrier Indigo has bid for Air India’s international operations, while privately-held Bird Group has expressed interest to buy the ground-handling unit of Air India.

Air India had a net debt of 520 billion rupees as of March 2017. The figure includes working capital and other debt of 320 billion rupees and aircraft debt of 200 billion rupees.

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