Air operator permit policy to be amended for new FDI norms

Air operator permit policy to be amended for new FDI normsNEW DELHI: The government today said it will amend the existing policy for grant of air operator permit (AOP) to bring it in line with its recent decision to allow 100 per cent foreign direct investment in domestic airlines.

It would also be “examining” the substantial ownership and effective control (SOEC) norms of the various countries which permit more than 49 per cent foreign direct investment (FDI) in their airlines, Civil Aviation Secretary R N Choubey told reporters on the sidelines of an aviation event here.

Under the current norms, AOP or flying license is granted to a company only if its chairman and two-third Directors are Indian citizens and its substantial ownership and effective control is vested in Indian nationals.

“The policy relating to AOP being given, that policy will be completely aligned with the FDI Policy. So if there is something when higher FDI investment is not resulting in AOP being given, then the AOP requirement will be to that extent will be amended,” Choubey said.

Foreign investors, barring overseas airlines, are now allowed to have up to 100 per cent stake in local carriers under the recently liberalized FDI norms.

Under the new set-up, 49 per cent FDI will be through the automatic route and for anything beyond, government nod will be required. At present, up to 49 per cent FDI is permitted in scheduled airlines.

However, foreign airlines, under the norms, cannot invest more than 49 per cent in the domestic carriers.

The requirement of SOEC comes up at two places– for grant of AOP to an Indian citizen and at the place where India has to grant bilateral rights, he said.

“For the purpose of granting AOP, because the FDI limit has been increased, therefore, correspondingly the AOP requirement of substantial ownership and effective control will also have to be aligned with it. That will require amendment,” he said.

As far as bilateral rights are concerned, the requirement of SOEC is also a condition from International Civil Aviation Organization (ICAO) and not of a particular government or country, he said.

“All that it means is that if you are having more than 49 per cent then there may be an issue in getting the bilateral rights for flying abroad. But if you wish to fly within the country, then there is no bar,” he said.
When asked why an airline with 100 per cent investment from a foreign country will fly only domestic, Choubey replied, “India itself is a huge market. So somebody if wishes to use its domestic market they can do so.”

There are also code shares, the rules regarding which have been also liberalized, Choubey said, adding, “If they wish to grow within the country and also take up the code shares, they can do so.”

He said the purpose of allowing overseas investors own up to 100 per cent stake in Indian carriers is to encourage investments in domestic operations.

To a question whether domestic carriers owned 100 per cent by foreign investors will be allowed to fly international skies, Choubey said, “We are examining whether they can fly abroad. But presently, it appears that ICAO regulations are binding on signatory countries.”

“We will examine what other countries who are similarly placed are going in respect of the carriers being allowed to fly abroad and then will take a call,” Choubey said.

When asked how would the government ensure that foreign airlines comply with the 49 per cent FDI ceiling, he said, “As part of the approval, a very thorough due diligence will be done to ensure that directly or indirectly foreign airline ownership does not exceed 49 per cent, which is mandated.” –PTI

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