Govt meet to mull FDI hike in aviation

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Govt meet to mull FDI hike in aviation

Airline stocks will be in focus today as the long pending proposal of hiking foreign direct investment (FDI) in aviation will come up for discussion by the Committee of Secretaries.

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Airline stocks will be in focus today as the long pending proposal of hiking foreign direct investment (FDI) in aviation will come up for discussion by the Committee of Secretaries.

Here is a verbatim transcript of Sonia Shenoy's comments on CNBC-TV18. Also watch the accompanying video.

If indeed there are some changes that take place in the FDI norms then it will be a big respite for the airline sector. Currently, the government allows about 49% in FDI in aviation sector. It has also barred foreign airlines from holding any stake either directly or indirectly in domestic carriers. The proposal is to hike this FDI limit to about 74% and to allow foreign carriers to have stake either directly or indirectly into the domestic carriers.

The market view is that there will be no big changes announced on today. There are a whole host of reasons for this. A couple of days back we heard the Civil Aviation Secretary MM Nambiar say that there will be no changes indeed in the FDI in aviation. The reason for it is that there is no need for it right now and that they are looking for consolidation in the sector. Other reasons are that last week Air India was being recapitalized by the government to the tune of Rs 800 crore to prevent it from collapse which was the first tranche of its bailout. So post that the government may take a breather before taking any big decisions.

Naresh Goyal and Vijay Mallya have had diverse views on this entire FDI issue, while Jet Airways doesn't want the FDI to be hiked. Vijay Mallya is very keen that something of that sort happens. So any kind of decision by the government may give allegations to some kind of biases on the government front.

Incrementally, things are improving for the sector so the government may wait for some kind of fundamental improvement in passenger traffic to take any kind of formal step. The street view is that there might be a slight increase in the FDI but for sure there won't be any allowance of foreign carriers to enter into this particular space. The changes would be a lifesaver for the entire airline sector as Jet Airways saw a loss of about Rs 400 crore and so had Kingfisher and Spice Jet . However, not much is expected from today.