The Cabinet is expected to take up the issue of allowing investments by persons of Indian origin in domestic aviation on Saturday despite opposition from certain sections of the government.
Officials said a Cabinet note to this effect had called for treating investments by PIOs at par with those made by non-resident Indians.
NRIs are allowed to hold 100 equity stake in a domestic airline. PIOs, under current regulations, cannot hold any, even though foreign direct investment up to 49 per cent is allowed in domestic airlines.
Bringing PIOs on a par with NRIs will enable Neera Radia's Magic Air to obtain regulatory clearances. The application of Radia - a PIO holding 60 per cent in Magic Air - for starting the airline has been on hold as the government is not clear about the status of PIO investments in domestic aviation.
This also puts to rest the policy wrangle between commerce and finance ministries on whether to treat investments by PIOs on a par with NRI investments.
However, sources said some of the ministries had raised objections, as they feared that sources of PIO investments could not be traced to their origins.
The finance ministry, which had earlier held that PIO investments came under foreign direct investment, has clarified that PIO investments should be treated at par with NRI investments. The commerce ministry has, from the beginning, held that PIOs should be given the same status as NRIs.
The finance ministry now points out that the government has decided to give PIOs dual citizenship and that they are a subset of NRIs.
The government raised the FDI cap in domestic aviation from to 49 per cent in November 2004, when the Cabinet also allowed 100 per cent investment by NRIs in Indian carriers.
More the merrier