"Foreign airlines are still barred from equity participation in domestic air transport operations. There is a case for reviewing this policy as operation of airlines requires expertise as much as it does capital," the Planning Commission said in its appraisal.
Under current laws, foreign airlines cannot invest in an Indian airline. The government changed the policy in 1997 and barred international airlines from investing in Indian carriers, subsequent to which, international carriers like Gulf Air and Kuwait Air divested their holding in Indian private carrier Jet Airways.
The two international airlines held 20 per cent each in Jet Airways.
The position taken by the Planning Commission is in sharp contrast to the stand taken by Civil Aviation Minister Praful Patel on the issue. Patel has said allowing international airlines to invest in the domestic carriers will provide international carriers a backdoor entry into the Indian market.
Besides, Patel is also of the view that Indian carriers do not require management expertise from international carriers and the present requirement is only that of funds.
International carriers like Richard Branson's Virgin have been pressing for changes in the present policy. Branson has readied a war chest of $50 million to invest in Indian carriers.
The mid-term appraisal also calls for the restructuring of the state-run carriers, Indian Airlines and Air-India,
It says that the government could not go ahead with its earlier plans to divest stakes in the two carriers as a result of the unfavourable conditions prevailing in the global aviation sector.
At present the civil aviation ministry is working on a plan to divest the government holding in the two carriers through an initial public offer. The funds raised through the IPO will be utilised to fund the fleet acquisition plans of the two carriers.
Pointing out that the earlier Civil Aviation Policy has stifled the growth of the country's aviation sector, the mid-term appraisal advocates the need to take a re-look at the present policy.
"The new policy needs to be formulated keeping in mind the role of the sector in promoting tourism and trade as well as inter-modal considerations," the paper points out.
Calling for a change in the present policy that ensures connectivity to smaller cities, the mid-term plan appraisal has asked the government to change the present system with a system of providing direct subsidy through a minimum subsidy bidding process.
It also calls for the setting up of an airport regulator as the private sector is allowed to make an entry into the airport infrastructure sector.
"There is a need to establish a statutory regulator for economic regulation and dispute resolution," the mid term appraisal says adding that the government needs to explore the possibility of development of other airports through a public-private participation model, particularly those with tourist potential.
