PIB press release dated 4th march 2020
To permit foreign investment upto 100% by those NRIs, who are Indian Nationals, in case of M/s Air India Ltd., the Union Cabinet, chaired by the Prime Minister, Shri Narendra Modi has approved to amend the extant FDI Policy to permit Foreign Investment (s) in M/s Air India Ltd by NRIs, who are Indian Nationals, upto to 100% under automatic route.
As per the present FDI Policy, 100% FDI is permitted in scheduled Air Transport Service/Domestic Scheduled Passenger Airline (Automatic upto 49% and Government route beyond 49%). However, for NRIs 100% FDI is permitted under automatic route in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline. Further, FDI is subject to the condition that Substantial Ownership & Effective Control (SOEC) shall be vested in Indian Nationals as per aircraft rules, 1937. However, for M/s Air India Ltd., as per the present policy, foreign investment(s) in M/s Air India Ltd. Including that of foreign Airline(s) shall not exceed 49%, either directly or indirectly, subject to the condition that substantial ownership and effective control of M/s Air India Ltd. shall continue to be vested in Indian Nationals. Therefore, although 100% FDI is permitted under automatic route for NRIs in Scheduled Air Transport Service/Domestic Scheduled Passenger Airline, it is restricted to be only 49% in case of M/s Air India.
In light of the proposed strategic disinvestment of 100% of M/s Air India Ltd. by the Government of India, M/s Air India Ltd. will have no residual Government ownership and will be completely privately owned, it has been decided that foreign investment in M/s Air India Ltd be brought on a level playing field with other scheduled airline operators. The amendment in FDI policy will permit foreign investment in M/s Air India Ltd at par with other Scheduled Airline Operators i.e. upto 100% in M/s Air India Ltd by those NRIs, who are Indian Nationals. The proposed changes in FDI Policy will enable foreign investment by NRIs into M/s Air India Ltd. upto 100%, under automatic route.
Above amendment to the FDI Policy are meant to liberalise and simplify the FDI policy to provide ease of doing business in the country. Leading to largest FDI inflows and thereby contributing to growth of investment, income and employment.
The Union Cabinet has allowed some changes in the FDI Policy whereby NRIs are considered on par with OCIs (Overseas Citizens of India) and PIOs (Persons of Indian Origin). Secondly all NRI investments on repatriable basis will be henceforth considered as domestic investments. Since NRI has been clubbed together with OCI and PIO, that means all investments by NRIs, OCIs, PIOs on repatriable basis will be considered as domestic investments. So all reporting requirements under the relevant FEMA regulations will not be necessary in case of NRI/ OCI/ PIO investments in future. The relevant notification to the FEMA regulations is awaited, but the gist of the Press Release is as given below:
The Union Cabinet, chaired by the Prime Minister Shri Narendra Modi, has given its approval to review of Foreign Direct Investment (FDI) Policy on investments by Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs) and Overseas Citizens of India (OCIs). Following are the amendments approved by the Cabinet to incorporated in FDI policy:
(i) By amending relevant para, definition of NRI will be as under:
‘Non-Resident Indian’ (NRI) means an individual resident outside India who is citizen of India or is an ‘Overseas Citizen of India’ cardholder within the meaning of section 7 (A) of the Citizenship Act, 1955. ‘Persons of Indian Origin’ cardholders registered as such under Notification No. 26011/4/98 F.I. dated 19.8.2002 issued by the Central Government are deemed to be “Overseas Citizen of India’ cardholders”.
(ii) To provide that investment by NRIs on on-repatriable basis is domestic. Following new para is approved to be added:
‘Investment by NRIs under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment at par with the investment made by residents.’
The decision that NRI includes OCI cardholders as well as PIO cardholders is meant to align the FDI policy with the stated policy of the Government to provide PIOs and OCIs parity with Non Resident Indians (NRIs) in respect of economic, financial and educational fields. Further the decision that NRIs investment under Schedule 4 of FEMA (Transfer or Issue of Security by Persons Resident Outside India) Regulations will be deemed to be domestic investment made by residents, is meant to provide clarity in the FDI policy as such investment is not included in the category of foreign investment. The measure is expected to result in increased investments across sectors and greater inflow of foreign exchange remittance leading to economic growth of the country.