Foreign investment now permitted in the Indian aviation sector
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Foreign investment now permitted in the Indian aviation sector
Govt allows FDI in multi-brand retail, aviation - The Times of India
Interestingly this comes after the announcement of QE3 by Chairman of the US Federal Reserve. Looks like there won't be a problem of excess liquidity after QE3 comes through.
Govt allows FDI in multi-brand retail, aviation
Reuters | Sep 14, 2012, 06.24PM IST
NEW DELHI: India opened its supermarket sector to foreign chains on Friday after months of dithering, pushing ahead with the boldest reforms yet in Prime Minister Manmohan Singh's government as it tries to revive the country's tottering economic growth.
The government has decided to allow foreign airlines to buy stakes of up to 49 per cent in local carriers, heavy industries minister Praful Patel said on Friday, in a much-awaited policy move that provides a potential lifeline to the country's debt-laden airlines by opening up a fresh source of funding.
The move allows global firms such as Wal-Mart Stores to set up shop with a local partner and sell directly to consumers for the first time, which supporters say could transform India's $450 billion retail market and tame inflation.
Singh's government ignored calls from political parties for a U-turn on a hike to heavily subsidized fuel prices announced on Thursday, and also approved a policy to allow more foreign investment in airlines as well as selling off stakes in major state-run industries.
Prime Minister Singh was credited as the economist who opened up India's economy in the 1990s, but since taking office eight years ago he has repeatedly put off or rolled back difficult economic decisions.
Singh will need resolve and the support of powerful Congress party boss Sonia Gandhi if he is to muster the political will to fight off a wave of protests from both political allies and the opposition over reforms seen as costing jobs and raising prices.
The supermarket policy was first announced last year but a political backlash forced the Congress-led government to put the measure on hold.
Reuters | Sep 14, 2012, 06.24PM IST
NEW DELHI: India opened its supermarket sector to foreign chains on Friday after months of dithering, pushing ahead with the boldest reforms yet in Prime Minister Manmohan Singh's government as it tries to revive the country's tottering economic growth.
The government has decided to allow foreign airlines to buy stakes of up to 49 per cent in local carriers, heavy industries minister Praful Patel said on Friday, in a much-awaited policy move that provides a potential lifeline to the country's debt-laden airlines by opening up a fresh source of funding.
The move allows global firms such as Wal-Mart Stores to set up shop with a local partner and sell directly to consumers for the first time, which supporters say could transform India's $450 billion retail market and tame inflation.
Singh's government ignored calls from political parties for a U-turn on a hike to heavily subsidized fuel prices announced on Thursday, and also approved a policy to allow more foreign investment in airlines as well as selling off stakes in major state-run industries.
Prime Minister Singh was credited as the economist who opened up India's economy in the 1990s, but since taking office eight years ago he has repeatedly put off or rolled back difficult economic decisions.
Singh will need resolve and the support of powerful Congress party boss Sonia Gandhi if he is to muster the political will to fight off a wave of protests from both political allies and the opposition over reforms seen as costing jobs and raising prices.
The supermarket policy was first announced last year but a political backlash forced the Congress-led government to put the measure on hold.
Last edited by billboard; 17th Sep 2012 at 06:53.
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Good for Spicejet & Go Air.......!!! Already Jet & Indigo has nearly 49% FDI.. so they wont be much interested.....!!! Mr. Mallya can Issue another letter to its employees, hoping that FDI flows to KFA.....!!!!
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It may however be some good news to Jet airways and Indigo as well, namely because these airlines have "NRI" stakes which means their stakes are still up for grabs to foreign carriers.This is debatable but they will eventually have someway around it.
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To clarify 49% FDI was always allowed in Indian aviation, what was not allowed was the direct and/or indirect investment of a single $ by any international carrier. The new regulation permits that but not in the direct route so allowing some vetting.
Air India is not currently part of this exercise and has been left out. WW has commented that till AI is under the govt. FDI by his airline does not make sense as AI has the ability to under price the market.
KF could always have gotten FDI just not from another airline. Lack of any PE from outside or even inside wanting to invest shows that his options are still limited. By guess is that QR will invest with him and he will become a feeder to QR to take some business away from EK. Option also is for EY who might pick up Spice stake as a feeder. Don't think any European carrier would want to pick a stake as there is not added benefit to them and they are not really flush with cash.
Jet and Indigo promoters can probably now cash out on the brand equity they have created by selling the NRI stakes to foreign airlines and since this was FDI they wont have to pay tax!!!! Might see these guys walking away laughing all the way to the bank as they will earn more this way than running either airline.
Air India is not currently part of this exercise and has been left out. WW has commented that till AI is under the govt. FDI by his airline does not make sense as AI has the ability to under price the market.
KF could always have gotten FDI just not from another airline. Lack of any PE from outside or even inside wanting to invest shows that his options are still limited. By guess is that QR will invest with him and he will become a feeder to QR to take some business away from EK. Option also is for EY who might pick up Spice stake as a feeder. Don't think any European carrier would want to pick a stake as there is not added benefit to them and they are not really flush with cash.
Jet and Indigo promoters can probably now cash out on the brand equity they have created by selling the NRI stakes to foreign airlines and since this was FDI they wont have to pay tax!!!! Might see these guys walking away laughing all the way to the bank as they will earn more this way than running either airline.
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This new FDI amendment will help KFA neutralize the situation if not doing a positive turn around. HOW ? Mallaya would "bring in" more "external" cash into his airline. Read between lines. A few external players may also be interested in picking up some stake with spice jet.
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Lufthansa & Qatar Airways are negotiating with few startups (Regional) in India...
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Would it make much difference?
I feel that inadequate access to funding is only a secondary problem for the Indian aviation sector. If a business model is fundamentally flawed, then allowing greater access to funding should not make much of a difference. For Indian aviation to realize its vast potential, the cost structures need to be rationalized. Towards this end, the move to allow direct import of ATF would do more to help the sector than allowing FDI. Even better, the Union Government should push the states to levy a uniform 4% sales tax. Some states still levy a 33% sales tax on ATF!!!
Anybody knows whether the operators have started "direct" import of ATF? And to what extent? Any info on this would be greatly appreciated.
Anybody knows whether the operators have started "direct" import of ATF? And to what extent? Any info on this would be greatly appreciated.
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Anyone taking a stake in KFA is going to be sore about it later. Surely, one would think, Airlines would do proper due diligence but I've seen fools born every day. In this sector anyway. I know other regional heavyweights (read non Arab) companies are also looking at new ventures. Anything that's going to revive aviation in that tightly controlled Country without a clear Aviation policy, is welcome. If it's designed to do that.
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Anybody knows whether the operators have started "direct" import of ATF? And to what extent? Any info on this would be greatly appreciated.
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Anybody knows whether the operators have started "direct" import of ATF? And to what extent? Any info on this would be greatly appreciated
The validity of the import authorisation is for 18 months.
High taxes on ATF by the state, ranging from four per cent to 33 per cent, has been hitting the airlines hard as they have to spend more than 40 per cent of the operating cost on fuel.
They have been demanding reduction in sales taxes by the state government besides putting the ATF in declared goods category.
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Adding to the above as mentioned by blackbirdsr72
While ATF import has been permitted for all the above mentioned airlines....
They are facing difficulty in transportation and storage of the fuel once it arrives at the seaports in India . They have to spend more in money transporting and are finding it difficult to find storage space for the fuel .
This is because all the storage space for fuel at the airports are used up by the govt oil companies .
I read somewhere that SpiceJet had signed an agreement with Reliance for the transportation and storage of ATF . Not sure how far that is true .
In the present situation the best method for import of ATF would be none other than to import it in the fuel tanks of the aircraft when flying back from international destination.
Previously any aircraft bringing in excess fuel from abroad and wishes to continue on a domestic sector has to pay import taxes on the same . However if it continues onwards to an international destination it is exempt from doing so. So airlines would design their schedules accordingly
I am not sure though whether the above method is in use by any Indian airline at present or if its allowed by DGFT ( Director General of Foreign Trade ) in their approval for import of ATF
While ATF import has been permitted for all the above mentioned airlines....
They are facing difficulty in transportation and storage of the fuel once it arrives at the seaports in India . They have to spend more in money transporting and are finding it difficult to find storage space for the fuel .
This is because all the storage space for fuel at the airports are used up by the govt oil companies .
I read somewhere that SpiceJet had signed an agreement with Reliance for the transportation and storage of ATF . Not sure how far that is true .
In the present situation the best method for import of ATF would be none other than to import it in the fuel tanks of the aircraft when flying back from international destination.
Previously any aircraft bringing in excess fuel from abroad and wishes to continue on a domestic sector has to pay import taxes on the same . However if it continues onwards to an international destination it is exempt from doing so. So airlines would design their schedules accordingly
I am not sure though whether the above method is in use by any Indian airline at present or if its allowed by DGFT ( Director General of Foreign Trade ) in their approval for import of ATF
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They are facing difficulty in transportation and storage of the fuel once it arrives at the seaports in India . They have to spend more in money transporting and are finding it difficult to find storage space for the fuel .
This is because all the storage space for fuel at the airports are used up by the govt oil companies .
I read somewhere that SpiceJet had signed an agreement with Reliance for the transportation and storage of ATF . Not sure how far that is true .
This is because all the storage space for fuel at the airports are used up by the govt oil companies .
I read somewhere that SpiceJet had signed an agreement with Reliance for the transportation and storage of ATF . Not sure how far that is true .
