Up for sale national flag carrier Air India will not be sold to a foreign owned airline.
The government added a special clause just for Air India under its foreign direct investment (FDI) policy.
That means while foreign carriers may own up to 49% of an Indian airline, it does not apply for investment in Air India.
The consolidated FDI policy does allow up to 100% non-airline foreign ownership for other airlines.
The government has already signalled its intent to divest from the national carrier due to the huge debt burden.
Although India’s largest domestic carrier IndiGo has announced an interest, no party – foreign or domestic- is likely to want the entire business.
It will likely be broken up and its few valuable units sold off.
Barring foreign money is a bad deal for the Indian government as it restricts an already small field of potential investors.
"Foreign airlines’ equity participation up to 49% in Air India’s divestment will be critical. Restricting foreign airlines will send a wrong signal and constrain the number of interested bidders," said Kapil Kaul, CEO, South Asia of aviation consultancy firm CAPA.
