Cabinet note moved on FDI in aviation

Before the proposal of allowing foreign airlines to buy stakes in domestic carriers is taken up by the Cabinet, Prime Minister Manmohan Singh is likely to consult senior ministers to build a consensus on the contentious issue, sources said.

"While the final cabinet note has been moved by the Department of Industrial Policy and Promotion (DIPP), the Prime Minister is likely to hold consultations among ministers for Finance, Commerce, and Home Affairs. Besides, he would also consult with Railways Minister Mukul Roy, who is from TMC, a key ally in the UPA government," they said.

It was West Bengal Chief Minister and TMC Chief supremo Mamta Banerjee who had forced the government to put on hold the decision to allow 51% foreign direct investment (FDI) in multi-brand retail.

The commerce and industry ministry had moved a cabinet note to allow foreign carriers pick up equity in their Indian counterparts. Finance Minister Pranab Mukherjee in his Budget speech had said that a proposal to allow foreign airlines to participate with up to 49% in the equity of an air transport undertaking, engaged in operation of scheduled and non-scheduled air transport services, is under active consideration of the government.

At present, India allows foreign investors, not related in any way to airline business, to buy up to 49% stake in domestic airlines, but foreign carriers are not permitted to invest in them. Allowing foreign airlines to buy stake in domestic carriers is expected to benefit Kingfisher Airlines, which is burdened by a debt of over Rs 7,000 crore.