Thursday, April 12, 2012

Cabinet approves Air India restructure

The Cabinet approved restructuring of Air India on Thursday at the Cabinet Committee on Economic Affairs (CCEA) meet. The plan includes infusion of additional equity to shore up the precarious financial position of the cash-strapped carrier.
As part of Air India's restructuring, the government has decided to infuse Rs 4,000 crore as additional equity during the current fiscal. This would raise the airlines' equity base to Rs 7,345 crore.
However, the issue of FDI in aviation was not discussed in the meeting. Sources say FDI in aviation has been deferred for a week.
Sources said that the Law Ministry had cleared the note which allows 49 per cent FDI in the aviation sector.
Sources said FDI in aviation was not placed on the Cabinet agenda for the CCEA meet as it could lead to 'upheaval' in aviation stocks. Sources add that Prime Minister Manmohan Singh, Finance Minister Pranab Mukherjee, Commerce Minister Anand Sharma and Aviation Minister Ajit Singh are in favour of FDI but there are concerns within the government over the Mamata Banerjee-led Trinamool Congress (TMC) opposing the proposal.
The move would allow cash-strapped domestic airlines like Kingfisher Airlines to access funds more easily. Indian airlines have been battered by rising fuel costs, high taxes and fierce competition in a market where five of the six main operators are losing money. Kingfisher Airlines and GoAir are in favour of FDI but Jet Airways and Indigo oppose it.
Source : Times of India

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