Indian Government allows FDI in aviation

The government on has announced it would allow 49% FDI in aviation. This is a  major move for the aviation sector.


Civil Aviation Minister Ajit Singh said that the sector has been under financial stress and now banks will look at them favourably.

International carriers, Lufthansa & Virgin Atlantic, however told ET Now that they are not interested in picking up stakes in Indian carriers.

Earlier, the government allowed foreign investors, not related to airline business, to buy up to 49 percent stake in domestic airlines but foreign carriers are not permitted to invest. The government had initiated the process in January but key UPA constituent Trinamool Congress was opposed to it.

This provides a potential lifeline to the country's debt-laden airlines by opening up a fresh source of funding. The aviation stocks surged on hopes that the government will finally tweak rules about allowing foreign direct investment in the sector. The sector has been reeling under pressure due to high fuel prices. Most of the Indian air carriers are cash-starved and need equity to keep business running.

Cash-strapped KingfisherBSE 7.88 % Airlines, which is burdened with a debt of over Rs 7,000 crore, has been in the forefront of pushing for permission to allow foreign airlines to invest.

The moves follow a 12 percent hike in the price of heavily-subsidised diesel on Thursday night, which some analysts saw as the government signalling its intent to reinvigorate its long-stalled reform agenda.