By Ritika Chauhan
On Wednesday, the government initiated the process of disinvestment and privatisation in Air India by allowing foreign entities to invest and own up to 49 percent of the airline. The bid for the same is scheduled to start after the budget is passed. Foreign investment up to 49 percent was already permitted in other Indian airlines but not Air India until now. This marks the end of the preferential treatment given to the airline.
A joint venture
The substantial ownership and control, however, can remain in the hands of Indians only. This means that the foreign entities can enter into a joint venture with an Indian entity, such that it owns at most 49 percent. This ownership structure is similar to that of Vistara, where Singapore Airlines has entered into a joint venture with Tata Sons.
A favourable reform
A senior airline official has expressed that anyone willing to invest in Air India should necessarily have the expertise and financial strength at its disposal for this work. Economists and experts around India believe that this is a highly favourable reform and that around four to six bids are expected to be received. The International Air Transport Association (IATA), a global grouping of airlines that includes Air India, said the amendment in the FDI policy is a step in the right direction.
There are several contenders for investing in this opportunity. This includes the Tatas and Singapore Airlines who have said that were keeping this option open. IndiGo has given a formal expression of interest in this venture. Qatar Airways has long wanted to enter the Indian airline market and has shown interest in Air India.
Featured Image Source: Wikimedia Commons
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