India’s government is upholding a controversial ban on foreign airlines holding stakes in the country’s domestic carriers.

Civil aviation minister Praful Patel recently announced that the long-standing ban would be retained, despite repeated calls from many for it to be eased. The policy also bars foreign airlines from having any sort of management role in the country’s domestic airlines.

India’s ban on foreign airline investment in the country’s aviation sector has been in place since 1997, when a new civil aviation policy was introduced by the then-government that was widely criticised as being designed to protect state-owned Air India and Indian Airlines. The country’s largest privately owned airline, Jet Airways, was affected by the policy in 1997 as at the time it was 40%-owned by Gulf Air and Kuwait Airways. The two Middle East carriers were forced to sell their shares to Jet’s majority owner, Naresh Goyal.

There was hope from some quarters that the current government, which came to power last year and which has surprised many by opening up the market to new competition, would shortly scrap the ban. That hope appears now dashed as Patel’s announcement that the ban will remain in place comes just weeks before the government is due to publish its long-awaited new civil aviation policy. The new policy has been under consideration for some time and much of it will be based on the recommendations of a government-appointed committee that completed a report on proposed changes late in 2004.

The committee said in its report there was an urgent need for foreign capital in the country’s aviation sector and recommended that foreign airlines be allowed to own up to 49% of local carriers. Non-Indian businesses, which are not airlines, are allowed to own up to 49% of Indian airlines – it is only non-Indian airlines which are prohibited from taking a stake in Indian airlines.

Committee members also called for a sweeping liberalisation of the country’s airline sector to allow for the establishment of new airlines and for privately owned domestic carriers to be permitted to operate international services. Several of its recommendations have already been implemented, enabling privately owned Air Sahara and Jet Airways to start operating internationally and allowing for the launch of several new domestic carriers.


Source: Airline Business