Clear road map for sale of Air India needed

Nod for 49% foreign stake welcome, as govt paves the way for privatisation

The Union Cabinet has approved a series of changes in foreign direct investment norms as the government prepares to enter the last lap of its economic policy-setting phase ahead of the 2019 election. Key among these was the decision to allow up to 49 per cent overseas ownership, including by a foreign airline, in Air India. The relaxation in ownership norms clears the decks for possible bidders such as the Singapore Airlines-Tata combine and Jet Airways — with its overseas equity and route partners — to make a more detailed commercial assessment of the investment opportunity the state-owned flag carrier presents. Given the carrier’s accumulated debt of about ~50,000 crore and the fact that the interest of potential investors is likely to be focussed on Air India’s lucrative longhaul international routes and its fleet of more than 40 widebodied aircraft, disinvestment will be neither easy nor guaranteed. At the very least, the government needs to set a clear, unambiguous road map for the sale process.

The other reform cleared by the Cabinet was the crucial decision to put 100 per cent FDI in single brand retail trading under the “automatic” route, accompanied by the long-sought relaxation of mandatory local sourcing norms. The five-year holiday on the 30 per cent local-sourcing requirement is expected to give companies setting up shop here adequate time to identify, train and even technologically assist in the creation of local supply chains.

The Hindu, January 12