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Govt's A-I, IA sell-off plan could be upset

The government's plans to privatise Air India and Indian Airlines, the two state-run airlines, may have to be reworked if the government accepts a suggestion to permit higher foreign investment in the sector, the Indian Express newspaper said on Thursday.

The newspaper said a group headed by federal Finance Minister Yashwant Sinha had recommended that the government allow foreign airlines to enter the domestic market and proposed an increase in the foreign direct investment limit in the business.

It said the group, which included other federal ministers, had recommended that the foreign equity cap in the civil aviation business be raised to 49 per cent from 26 per cent at present.

"If the government clears the proposal of raising FDI (foreign direct investment) in civil aviation, the entire disinvestment strategy for both Air India and Indian Airlines may have to be reworked," the paper quoted an unnamed ministry official as saying.

The government closed bids in case of both airlines in December.

It is selling up to a 40 per cent stake in flag carrier Air India, of which 26 per cent can be purchased by a foreign airline.

In case of domestic carrier Indian Airlines, it plans to sell a 26 per cent stake, but the bidding is limited to domestic company, non-resident Indians and foreign firms majority-owned by expatriate Indians.

Bidders for Air India include Singapore Airlines along with India's Tata group, Dubai's Emirates, Air France in league with Delta Airlines and British-based business barons L N Mittal and the Hinduja brothers.

Bidders for Indian Airlines include the Tata group, the Hindujas and consumer durables firm Videocon International.

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