• FDI in airlines may hit air pocket with Centre’s circular on ownership

    Experts have described as ‘contradictory’ and ‘confusing’ a circular issued by the Centre stating substantial ownership and effective control (SOEC) of airlines should vest with Indian nationals as it runs contradictory to its decision to raise foreign direct investment (FDI) limit in airlines to 100 per cent.

    The Department of Industrial Policy and Promotion (DIPP) had issued the circular retaining the clause which said substantial ownership and effective control (SOEC) should vest with Indian nationals.

    “Hundred per cent FDI with substantial ownership and control lying with Indian nationals is contradictory, baffling and has created needless confusion,” said Amber Dubey, Partner and India Head of Aerospace and Defence, KPMG.

    While the DIPP circular mentions that 100 per cent FDI equity is permitted for scheduled domestic airlines and regional air transport services, it also adds that “there is no change in the Other Conditions mentioned in the FDI policy for this sector.” The other conditions for the civil aviation sector, in the FDI policy (2016), clearly mention that an air operator permit will be granted to a company only if it is registered in India, the Chairman and two-thirds of its directors are Indian citizens and substantial ownership and effective control is vested in Indian nationals.
    “Either the government has to change the conditions (of the FDI policy) or amend some rules,” said Devraj Singh, Executive Director – Tax and Regulatory Services, EY. “Unfortunately or fortunately, they have deliberately mentioned that other conditions will remain the same.”

    There was no clarity on the ownership clause for foreign airlines among both the civil aviation ministry and the DIPP.

    “Please ask the civil aviation ministry about the other conditions. As far as we are concerned, the conditions remain the same,” a senior DIPP official said. James Van Riemsdyk Authentic Jersey

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