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Air India divestment: NRI investment not treated as FDI, government to clarify

aviation | Feb 12, 2020 12:46 PM IST

Air India divestment: NRI investment not treated as FDI, government to clarify

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The clarification will state that the equity shareholding of a non-resident Indian will not be considered a foreign direct investment as the person is a citizen of India but only residing overseas.

The government is likely to clarify that a non-resident Indian can hold more than 49 percent stake in Air India as per the current norms, sources close to the development told CNBC-TV18.

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The clarification, which is likely to be a part of a response to queries raised by potential bidders, will state that the equity shareholding of a non-resident Indian will not be considered a foreign direct investment as the person is a citizen of India but only residing overseas.
As per the current Aircraft Act and foreign direct investment norms for domestic airlines, up to 49 percent foreign direct investment is permitted in Air India as the substantial ownership and effective control has to stay with an Indian national.
The last date of submission of written queries on preliminary information memorandum and share purchase agreement ended on February 11 and hence, the transaction advisor Ernst & Young LLP India is expected to issue a clarification on the queries raised by interested parties.
"There is some confusion on FDI. We will clarify that NRI investment will not be part of FDI. The clause of substantial ownership and effective control needs an Indian national with majority shareholding in Air India and NRIs are Indian nationals," a source aware of the matter said.
Additionally, CNBC-TV18 has also learnt that there are no plans to tweak the FDI policy with respect to Air India as of now.
"Aircraft Act and current FDI policy will be in effect for Air India divestment. There are no plans to change that. FDI will be limited to 49 percent and substantial ownership and effective control will stay with Indian nationals," the sources said.
The government invited preliminary bids for the sale of 100 percent stake in Air India, 100 percent stake in its subsidiary Air India Express and its entire 50 percent stake in joint venture AISATS on January 27. The last date for submission of preliminary bids is March 17 and the intimation to qualified bidders is expected by March 31.
This is the second attempt at divestment of national carrier Air India. While the first attempt didn't clarify the amount of debt and liabilities which will be transferred to the potential buyer, the government has clarified at the preliminary stage that the airline, burdened with a debt of over Rs 60,000 crore, will be sold with only Rs 23,286.5 crore and current liabilities will be matched against current assets.
Current assets will include forward bookings, spare parts among others. The government is currently engaged in finalising what all components will combine to arrive at the debt figure of Rs 23,286.5 crore. There would be no re-allocation of debt and liabilities of AISATS, a joint venture of Air India and Singapore-based SATS.
In the second attempt, the government has also mandated the buyer to use the brand 'Air India' as it believes that the brand has "enormous value and is the most renowned name from India in the global space."
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