India open to further reforms on airline investment: source

NEW DELHI Thu Nov 15, 2012 11:28pm IST

787 Dreamliners, including an airplane for Air India (R), are seen on the production line at the Boeing Commercial Airplane manufacturing facility in Everett, Washington February 14, 2011. REUTERS/Anthony Bolante/Files

787 Dreamliners, including an airplane for Air India (R), are seen on the production line at the Boeing Commercial Airplane manufacturing facility in Everett, Washington February 14, 2011.

Credit: Reuters/Anthony Bolante/Files

Stocks

   

NEW DELHI (Reuters) - India is open to further reforms to lure overseas investors into its airlines, a government source said, after a dearth of interest following changes to investment rules left Kingfisher (KING.NS) and others still short of much-needed funds.

The aviation ministry will meet local carriers soon to ask what changes were needed in the policy, added the source, with direct knowledge of policy developments.

India changed its Foreign Direct Investment (FDI) policy in September to allow foreign carriers to buy stakes of up to 49 percent in domestic airlines, a move seen as a potential boon especially for debt-laden Kingfisher Airlines Ltd.

All three listed Indian carriers - Jet Airways (JET.NS) and SpiceJet (SPJT.BO) as well as Kingfisher - are said by some analysts to be on the lookout for investment from a foreign carrier, providing a new source of funding for the industry.

The fiercely competitive Indian aviation industry lost a combined $2 billion last year. All but unlisted IndiGo lost money, hurt by high state taxes on jet fuel, expensive airports and regulatory uncertainty.

But since FDI rules were changed, no carrier has publicly expressed an interest in buying a stake in Kingfisher or any other airline in India, one of the fastest growing markets in the world.

"We are also surprised why there is no activity. It's a fact that no foreign airline has approached us yet," the source told reporters speaking on condition of anonymity.

"We will ask these (local) airlines why FDI failed to pick up. What are the issues they are facing, if they are talking to someone," the source added.

India's high tax on aviation fuel was the biggest issue discouraging foreign carriers wanting to invest in Indian airlines, the source said. State taxes make jet fuel in India about 50 percent costlier than the global average.

India is talking to states to cut taxes on jet fuel, the source added.

"(The) crux is that you need to bring growth to the sector ... We have to create the environment to attract investments." (Writing by Matthias Williams; Editing by David Holmes)

We welcome comments that advance the story through relevant opinion, anecdotes, links and data. If you see a comment that you believe is irrelevant or inappropriate, you can flag it to our editors by using the report abuse links. Views expressed in the comments do not represent those of Reuters. For more information on our comment policy, see http://blogs.reuters.com/fulldisclosure/2010/09/27/toward-a-more-thoughtful-conversation-on-stories/
Comments (1)
CommunalAward wrote:
Govt delayed FDI in Aviation/Retail/Media to promote Bania caste hegemony in India.

Nov 16, 2012 12:14pm IST  --  Report as abuse
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

REUTERS SHOWCASE

Diwali Sales

Diwali Sales

Gold sales jump about 20 pct for Diwali - trade body  Full Article 

World Bank Rival

World Bank Rival

Three major nations absent as China launches W.Bank rival in Asia  Full Article 

Wal-Mart India

Wal-Mart India

Murali Lanka appointed as Wal-Mart India operations chief  Full Article 

Microsoft Earnings

Microsoft Earnings

Microsoft sales beat Street hopes, cloud profits up.  Full Article 

Special Report

Special Report

Why Madrid's poor fear Goldman Sachs and Blackstone  Full Article 

U.S. Economy

U.S. Economy

Spectre of no-inflation world looms over Fed's return to normal  Full Article 

Insider Trading

Insider Trading

Rengan Rajaratnam, SEC to settle civil insider trading charge.  Full Article 

Market Watch

Market Watch

Betting on the beaten up? Investors pin hopes on stocks in Europe, Japan.  Full Article 

India Insight

India Insight

Kalki Koechlin on her role as a disabled girl in “Margarita, With a Straw”  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage