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Business opportunities in India

Ministry of Civil Aviation19-August, 2010 17:42 IST

 

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Reco The  Policy on foreign equity participation  in  the  domestic  air transport services has been  revised w.e.f. 31.1.2008. The present limit of Foreign Direct Investment (FDI) in aviation sector are as under:

Airports:

Greenfield Projects: FDI upto 100% is allowed under the automatic route subject to sectoral regulations notified by Ministry of Civil Aviation. Existing Projects: FDI upto 100% is allowed , however beyond 74% FDI, approval of FIPB is required and also subject to sectoral regulations notified by Ministry of Civil Aviation.

Air Transport Services:

(i)Scheduled Air Transport Service/Domestic Scheduled Passenger Airline – FDI upto 49% and investment by Non-Resident Indians (NRI) upto 100% allowed on the automatic route subject to sectoral regulations notified by Ministry of Civil Aviation and no direct or indirect participation by any foreign airlines.

(ii):Non-Scheduled Air Transport Service/ Non-Scheduled airlines, Chartered airlines and Cargo airlines: FDI upto 74% and investment by Non-Resident Indian (NRI) upto 100% allowed on the automatic route subject to sectoral regulations notified by Ministry of Civil Aviation and no direct or indirect participation by any foreign airlines in Non-scheduled and Chartered airlines. Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines.

(iii)Helicopter services/seaplane services – FDI upto 100% allowed on the automatic route subject to sectoral regulations notified by Ministry of Civil Aviation and approval of Directorate General of Civil Aviation (DGCA). Foreign airlines are allowed to participate in the equity of companies operating Helicopter and Seaplane Services.

Other services under Civil Aviation Sector:

(i) Ground Handling Services: FDI upto 74% and investment by Non-Resident Indians (NRI) upto 100% allowed on the automatic route subject to sectoral regulations notified by Ministry of Civil Aviation and security clearance.

(ii) Maintenance and Repair Organizations – FDI upto 100% allowed on the automatic route subject to sectoral regulations notified by Ministry of Civil Aviation.

(iii) Flying training Institutes and Technical Training Institutions – FDI upto 100% allowed on the automatic route subject to sectoral regulations notified by Ministry of Civil Aviation and approval of DGCA.

The proposal to allow foreign airlines to invest in domestic airline is being examined.

The Domestic Air Transport Policy approved by the government provides for foreign equity participation up to 49% and investment by Non-Resident Indians (NRIs) up to 100% in the domestic air transport services. Foreign airlines are, however, not permitted to pick up equity directly or indirectly.

1) Permission to operate scheduled services will be granted either:-

A. to a citizen of India; or

B. to a company or a body corporate provided that;

a. It is registered and has its principal place of business within India;

b. Its Chairman and at least two-thirds of its Directors are citizens of India; and

c. Its substantial ownership and effective control is vested in Indian nationals.

2) Foreign Financial Institutions and other entities that seek to hold equity in the domestic air transport sector shall not have foreign airlines as their shareholders.

3) An applicant shall be required to furnish full and detailed information with regard to the shareholding of any airline in the foreign investing institution/entity, if any, and composition of the Board of Directors and senior management of the said foreign investing institution/entity.

4)An applicant who seeks permission to operate air transport services in the domestic sector shall be required to give a declaration that no foreign airline is in financial or commercial tie up with him or has the management/ownership interest in him.

5)While the foreign investing institution/entity, which seeks to hold equity in the domestic air transport sector, may have representation on the Board of Directors of the Company, such representation shall not exceed 1/3rd of the total.

6)Any Foreign Financial Institution/entity, which seeks to make investment in the domestic air transport sector, shall not be a subsidiary of a foreign airline. A leasing company leasing aircraft to an operator in the domestic air transport sector shall also not be a part of an airline. However, wet leasing of an aircraft may be allowed from any source subject to the fulfilment of the guidelines issued by the Government/DGCA.

7)A domestic sector air transport operator shall not have agreements such as shareholders agreements etc. with a foreign airline, containing provisions/arrangements empowering such foreign airlines or others on their behalf to have effective control in the management of the domestic airline.

8)A domestic air transport operator shall not enter into an agreement with a foreign airline, which may give such foreign airline the right to interfere in the management of the domestic operator.

9)A domestic air transport operator may enter into financial arrangements with a bank and/or other financial institutions for the purpose of lease finance, hire purchase or other loan arrangements, but such a tie up shall not be permitted with a foreign airline.

10)Management contract with a foreign airline shall also not be permitted to a domestic air transport sector operator.

11)Marketing arrangements such as ground handling, general sales agency, code sharing, interlining will, however, be permitted.

12)A domestic air transport sector operator will also be permitted to get maintenance, overhaul, repair works done and training of pilots/engineers conducted either at the facilities available with other airlines or those certified by the Director General of Civil Aviation on such terms as may be prescribed.

13)A domestic air transport sector operator may be permitted to employ foreign pilots/engineers till he is able to train his own manpower. This shall, however, be permitted with the express approval of the competent authority and for such period and terms as may be prescribed by the said authority.

14)An applicant who seeks permission for domestic air transport operations will be required to give a declaration that he fulfils all the requirements mentioned in the above guidelines and in case of any change, he shall notify the competent authority within one month of such change. In addition, the applicant will be required to furnish such a declaration every year.

15)A domestic air transport operator, who furnishes wrong information in respect of any of the above prescribed guidelines at any stage, shall be liable for suspension/cancellation of his operating permit
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