Budget 2019 : Aviation

The Union Budget 2019 has made provisions for the relaxation in the FDI norms in the aviation sector. This will allow the beleaguered airlines of India – Air India and Jet Airways.

Both these airlines are looking for buyers though due to different reasons. Air India is a government asset which the government hopes to divest. Jet Airways is under financial pressure and has been –put for sale under the bankruptcy proceedings.

Salient Features

• The Aviation Ministry has been allocated Rs 4,500 crore in the Budget.
• It is 115 % less than Rs 9,700 crore given in 2018-19 fiscal.
• The budget aims to make India a hub for aircraft leasing.
• Ahmedabad s GIFT city a tax-free zone should be developed as the hub for aircraft leasing.
• The Maintenance Repair and Overhaul (MRO) sector would require a tax rebate from the government.
• The Centre has allocated Rs 480 crore for regional connectivity scheme UDAN, under which the “proposal is for the revival of 50 airports and Viability Gap funding for North East Connectivity”.

Efforts in the Past

This will not be the first time that the government is trying to divest its stake in Air India. An earlier attempt by the government to divest 76% stake in the national carrier did not find any taker.

The government now intends to sell 100% in the national carrier and the move to relax FDI may interest buyers of Air India.

Is all clear?

There is no clarity on the Substantial Ownership and Effective Control (SOEC) clause in the Budget. The SOEC clause bars any foreign investor from taking complete control of the operations of the airline and the airlines must be run by a board that has two third members as Indian.