India retains restrictions on overseas airlines ownership in local airlines

According to Bloomberg, India has retained restrictions that prevent overseas airlines from raising stakes in local carriers even as it unveiled new rules to attract foreign investors into the country´s growing major aviation market.

The Indian government said in a statement on June 20, 2016 that it will allow foreign entities such as funds and portfolio investors to fully own local airlines, removing an earlier cap of 49 percent. Prime Minister Narendra Modi´s administration has decided to bar foreign carriers from raising their stakes beyond 49 percent. India has eased rules for local carriers to fly to overseas destinations.

Overseas investors will have to seek government permission to boost stake beyond 49 percent, according to the June 20 statement. Foreign airlines can still partner with overseas investors to set up a fully foreign-owned airline, according to Amber Dubey, a consultant at KPMG in Gurgaon near New Delhi.

Earlier in June, Modi´s cabinet decided to permit domestic airlines to fly overseas provided they deploy 20 planes or 20 percent of capacity, whichever is higher, on local routes. Previously, carriers needed to have a minimum of 20 aircraft in their fleet and five years of domestic services.