"AirAsia's proposal has been cleared. It is as per the policy (which allows) up to 49 per cent FDI. Rs 80 crore is initial investment," a senior government official said. The Foreign Investment Promotion Board (FIPB), headed by DEA Secretary Arvind Mayaram, approved the proposal at its meeting here.
AirAsia has applied to FIPB to take 49 per cent in a venture with Tata Sons Ltd and Arun Bhatia's Telestra Tradeplace Pvt Ltd.
The carrier will now have to approach the aviation regulator Directorate General of Civil Aviation (DGCA) for further clearances.
"AirAsia will now have to take necessary licence etc. from DGCA," the official added. This would be the first entry of a foreign carrier in the domestic aviation sector after the liberalisation of FDI policy in September last year.
AirAsia is looking to start flying from this year-end with 3-4 planes and an initial investment of about USD 50 million by the Malaysian budget carrier. The proposed joint venture will operate from Chennai and will focus on providing domestic connectivity to Tier-II and Tier-III cities.
As per current rules, a carrier must complete five years of domestic operations before becoming eligible for starting overseas flights.
Tata Sons, the holding company of the USD 100 billion salt-to-software conglomerate, will hold 30 per cent in the joint venture but will not have any operating role in the airline.
This will mark the return of Tatas to aviation sector. State-owned Air India had grown out of Tata Airlines, which began flights in 1932.
AirAsia, through its operations based in Thailand and Malaysia, flies to Chennai, Bangalore, Kochi, Tiruchirappalli and Kolkata in addition to 20 countries. AirAsia, Tatas and Hindustan Aviation of Bhatias have signed a partnership agreement for the venture.
Air Asia has made the move to invest even as Etihad and Jet Airways continue to work towards finalising a deal for the Gulf carrier to invest in Jet.
AirAsia, Tata Sons and Arun Bhatia of Telstra Trade Place Pvt. Ltd have proposed to set up a low-cost carrier in India.
FDI in indian carriers- a game changer
Speaking on the sidelines of a seminar on "General Aviation: the next step organised by Indo American Chambers of Commerce," the Minister said the decision to allow foreign direct investment in Indian carriers "will be a game changer for the Indian civil aviation sector in the long run."
Singh said cooperation between India and the US had significantly strengthened over the years and the open sky policy has made India a fastest growing aviation market in the world, leading to growth in passenger traffic.
"This massive growth in air traffic would require huge investment for construction of new airports, expansion and modernisation of existing airports, improvement in connecting infrastructures like road, metro and sea link and also better flight management," he said.
The government has approved 15 more airports under the Greenfield Airports policy with majority of them being developed under the public private partnership mode.
Current estimates indicate that Indian airports would require an investment of about Rs 67,000 crore during the next five years alone of which 75 per cent is likely to be contributed by the private sector," Singh said.