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Jan 18, 2012, 08.58 AM IST | Source: CNBC-TV18

Aviation min okays cabinet note on 49% FDI to save airlines

The government has finally made a move to aid struggling carriers. The aviation minister will move a cabinet note on 49% FDI by foreign carriers, reports CNBC-TV18's Aakansha Sethi.

The government has finally made a move to aid struggling carriers. The aviation minister will move a cabinet note on 49% FDI by foreign carriers, reports CNBC-TV18’s Aakansha Sethi.

Aviation minister Ajit Singh said, “The government will release sufficient funds to pay them at least some part of PLI and wages. The second issue discussed is FDI. The CoS (Committee of Secretaries) had recommended that the FDI limit be raised to 49%. In fact 49% FDI is already allowed. The question was to allow airlines to participate in that FDI. I discussed it with FM and he has agreed and we will bring a note to the cabinet.”

For this to go through, however, Sebi will have to give the go ahead for a carve out. But sources indicate that the market regulator is not in favour of the proposal. Until Sebi gives a carve out for the aviation sector, this 49% proposal will be against the current Takeover Code because of the trigger point. So, there will have to be discussions between the Finance Ministry and Sebi.

There is a board meeting scheduled on January 28. It remains to be seen what final decision Sebi takes as right now it’s only at the discussion stage. Today’s high level meeting was on the aviation sector as a whole and Kingfisher was a very important part of that meeting.

Banks said that for the restructuring to take place, for the aviation sector as a whole it is important that there will be capital infusion in airlines and the solution to this that was proposed was that foreign airlines be allowed to invest up to 49%.

Earlier there was a discussion whether it should be 26% or 49%, so now the final figure has been arrived at 49%. This cabinet note will be floated shortly.

Direct imports of ATF were also discussed. There was a CoS on this which had recommended that imports of ATFs be allowed. This is again something that will help Kingfisher because they will not have to pay sales tax on this. This is also something that will be considered by the GoM. Both these key proposals that are likely to help Kingfisher Airlines will be taken up by the CoS and were discussed in today’s informal meeting.

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