India allows FDI in multi-brand retail, airlines

Cabinet on Friday decided to operationalise 51 per cent FDI in multi-brand retail but left it to the state governments to allow setting up of such stores.

The Cabinet headed by Prime Minister Manmohan Singh cleared the decision at a meeting this evening, a Union minister, who asked not to be identified, said here. For single-brand retail, the Cabinet decided that any firm seeking waiver of the mandatory 30 per cent local sourcing norms would have to set up a manufacturing facility in the country, the minister added.

In November last year, the government had approved 51 per cent FDI in multi-brand. This was, however, put on hold due to political opposition, including from UPA constituent Trinamool Congress.

The minister said since the implementation of the decision was put on hold, it had to go to the Cabinet again before going ahead with the decision.

The government also allowed foreign airlines to invest up to 49 percent in domestic carriers, giving wings to cash-strapped Indian carriers.

The cabinet committee on economic affairs (CCEA), chaired by the prime minister, approved the proposal that was stuck for months as there was no political consensus on the issue. Foreign airlines can now invest up to 49 percent in any of the private domestic carriers like Jet Airways, SpiceJet and Go Air.

Foreign carriers were not allowed so far to directly invest in Indian carriers for security reasons, although 49 percent FDI by non-airline players was allowed. According to civil aviation ministry sources, the directives for the implementation of the policy will be issued within a month.

When contacted, international airlines such as Emirates welcomed the move.

'We always welcome any reform which liberalises markets, including FDI rules. India is one of world's most important aviation markets,' an Emirates spokesperson told IANS.

Another Middle East airline Etihad Airways, however, was cautious in its reaction. The airline said it will wait for all the modalities of the new reforms are clear. 'It is our policy not to comment on such speculation. If or when we do make further investments of this sort, we will announce them in line with regulatory and commercial requirements,' Etihad Airways said in a statement.

Etihad Airways has investments in AirBerlin, Air Seychelles and Aer Lingus. The news came after the equities markets closed. However, in anticipation of the policy development, scrips of the three listed airlines - Kingfisher, Jet Airways and SpiceJet - closed on a high.

The Kingfisher Airlines scrip on the Bombay Stock Exchange (BSE) ended up 7.88 percent at Rs.10.81 a share. The scrip touched a high of Rs.11.40.

Kingfisher promoter Vijay Mallya is betting on the FDI clearance to bail out his cash-strapped carrier.

'I am an avid supporter of FDI. I don't see any reason why FDI from strategic partners like an airline should be banned or not permitted. Who would understand an airline better than another airline,' Mallya had said.

Jet Airway's scrip closed up by 1.97 percent at Rs.368.35. The scrip touched a high of Rs.381.80 in the trade. Budget carrier SpiceJet saw a 4.39 percent increase and stood at Rs.34.50. The stock climed to a high of Rs.35.80.

A group of ministers (GoM) headed by then Finance Minister Pranab Mukherjee had agreed Jan 17 to draft a cabinet note proposing a 49 percent cap on FDI by foreign carriers in domestic airlines.

Before that decision, various departments had proposed different investment caps - from 24 percent to 26 percent.