GoM meeting on ATF import and FDI next week

With indications that government is keen to allow foreign airlines buy stakes in Indian carriers, a Group of Ministers (GoM) is likely to meet next week to decide on the investment cap by them, official sources said on Friday.

The GoM is also likely to take a decision on allowing Indian airlines import aviation turbine fuel directly and get some breather from the high sales tax regime, they said.

The GoM could meet early next week to take a final call on how much equity a foreign airline would be allowed to take in Indian carriers, they said.

While a Committee of Secretaries has proposed a 49 per cent cap on foreign direct investment (FDI) by foreign airlines, the Civil Aviation Ministry has asked the government to allow 24 per cent and the Department of Industrial Policy and Promotion (DIPP) has recommended 26 per cent.

At present foreign investment of up to 49 per cent is permitted in the aviation sector, apart from 100 per cent in MRO (Maintenance, Repair and Overhaul), airports, helicopter and sea-plane operations, but foreign carriers are not allowed to invest.

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GoM would also take a call on allowing the airlines to directly import jet fuel. While the Civil Aviation Ministry is in favour of the demands raised by airlines like Kingfisher, the Petroleum Ministry is understood to have raised certain objections.

Such a move would help the ailing airline industry avoid paying high sales tax imposed by the states, ranging from four per cent to 40 per cent. The expenditure on jet fuel accounts 40 to 50 per cent of an airline's total operational cost.

Recently, the Commerce Ministry said it would take a decision on allowing import of jet fuel by airlines.

"It would not take more than three to four days....The decision is fairly in an advanced stage. Consultations have been completed with the stakeholders," Director General of Foreign Trade (DGFT) Anup K Pujari had told reporters after a meeting with Kingfisher promoter Vijay Mallya two days ago.

Pujari said the government was examining three options - to change the policy in entirety removing monopoly of the state enterprises like IOC to import aviation turbine fuel (ATF); to permit only the applicant (Kingfisher) to go in for ATF imports; or to allow such facility to whosoever makes an application.