The Telegraph
Since 1st March, 1999
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Govt agonises on FDI boosters

New Delhi, April 22: A new FDI policy cleared by a high-powered group of ministers in the run-up to the budget is likely to be rubber-stamped by the Cabinet on Wednesday.

But several ministers are gearing up to voice concerns over proposals which will allow up to 100 per cent FDI through the automatic route in oil refining, 100 per cent in airports/other physical infrastructure, up to 74 per cent in telecom and 49 per cent in airlines.

The civil aviation ministry is still not inclined to allow up to 100 per cent investment in airports through the automatic route, preferring the current policy of routing 100 per cent investments through the FIPB and some mega-investment proposals via the Cabinet.

It is learnt that the ministry of defence also has serious doubts about the advisability of allowing up to 74 per cent control in the telecom sector and 100 per cent in the oil sector to foreign players.

The ministry feels that control over these two vital sectors cannot be ceded without appropriate checks. The defence ministry feels the Iraq war has made the security scenario in the sub-continent more volatile than before and the government would be well advised to be more cautious about allowing automatic entry into vital sectors. Instead it is advocating a policy of case-by-case approvals.

Top civil aviation officials said the ministry has already made up its mind to firmly oppose the move on airports if it is raised, as they felt it is not warranted. They feel airports are security-sensitive areas, and it is necessary to vet the antecedents of those who pitch to set up or run airports.

Although the GoM on FDI has made it clear that air traffic control and policing will remain within the government’s purview, ministry officials point out the kind of access a foreign power will enjoy if a transnational loyal to it controls most facilities at a major Indian airport will be “enormous.”

In fact, civil aviation minister Shahnawaz Hussain wants not only to keep the four major metro airports under government control but also 10 more. These are Amritsar, Ahmedabad, Trivandrum, Calicut, Lucknow, Kulu, Jaipur, Udaipur, Goa, Trichy, Khajurao and Gaya.

Even on the issue of FDI in airlines, the civil aviation ministry has doubts about the security implications of letting foreign airlines take stakes in domestic aviation, despite having tacitly agreed to the move at the GoM.

Currently, no foreign carrier is allowed to hold equity in domestic airlines and the cap of FDI stands at 40 per cent. The move is to allow up to 49 per cent FDI, which could be from a foreign airline.

However, the ministry is willing to come to a compromise on the issue, provided foreign carriers are given stakes below 26 per cent (which means less say in running the airline) and in ensuring that chief executives and other decision-makers are Indian nationals.

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