The Indian government may lift a ban on foreign airlines investing in the country's domestic carriers as they battle intense competition and high fuel costs, the Economic Times said on Monday. The financial daily said the country's aviation ministry had given its approval to the move in principle with further discussions to determine what level of investment would be allowed.
If approved, the move could help inject much-needed capital into private Indian airlines, which have been struggling with increased competition, rising fuel costs and a falling rupee in recent months. Currently, foreign airlines are banned from investing in Indian airline firms either directly or through equity markets. Foreign institutions can buy shares in India's listed airlines Kingfisher, Jet Airways and SpiceJet.
The newspaper said the Department of Industrial Policy and Promotion, which frames policy on foreign investment, was in favour of overseas carriers taking up to a 26 percent stake in Indian airlines. But the civil aviation ministry preferred a lower, more restrictive cap of 24 percent, it added. Kapil Kaul, from the Centre for Asia Pacific Aviation, said allowing foreign airlines to take an initial 25 percent stake in an Indian carrier would be a good start, as domestic firms faced losses of up to $3.0 billion this year.