Executive Summary:
This corrigendum, issued by the Reserve Bank of India on November 25, 2016, modifies a notification (FEMA.362/2016-RB) regarding Foreign Direct Investment (FDI) in Air Transport Services. It revises conditions and limits for foreign investment in scheduled and non-scheduled air transport services, including specific provisions for foreign airlines and NRIs. The other contents of the original Gazette Notification remain unchanged.
Key Points / Main Content:
Air Transport Services Investment:
* Domestic Scheduled Passenger Airlines: 49% under automatic route.
* Regional Air Transport Service: 100% for NRIs.
* Non-Scheduled Air Transport Service, Helicopter and Seaplane services: 100% under automatic route.
Other Conditions for Air Transport Services:
* Includes Domestic Scheduled Passenger Airlines, Non-Scheduled Air Transport Services, helicopter and seaplane services.
* Foreign airlines can invest in cargo airlines, helicopter, and seaplane services within specified limits and entry routes.
* Foreign airlines can invest up to 49% in Indian companies operating scheduled and non-scheduled air transport services, subject to government approval.
Conditions for Foreign Airline Investment (up to 49%):
* Requires Government approval.
* The 49% limit includes FDI and FII/FPI investment.
* Must comply with SEBI regulations (ICDR, SAST, etc.).
* A Scheduled Operator's Permit requires: registration and principal business in India; Indian citizen Chairman and two-thirds of Directors; substantial ownership and effective control by Indian nationals.
* Security clearance is required for all foreign nationals associated with Indian scheduled and non-scheduled air transport services.
* Imported technical equipment requires clearance from the Ministry of Civil Aviation.
Additional Notes:
* FDI limits/entry routes at paragraph 9.31 and 9.32 apply when no investment is made by foreign airlines.
* NRI dispensation of up to 100% FDI continues as specified in paragraph 9.3.1c ii.
* The policy at 9.3.1c is not applicable to Ms Air India Limited.
Impact Analysis:
Indian Companies Operating Air Transport Services:
* Impact: Must adhere to revised FDI limits and conditions for foreign investment.
* Action Required: Ensure compliance with SEBI regulations, obtain necessary government approvals, and conduct security clearances for foreign nationals.
Foreign Airlines Investing in Indian Air Transport Services:
* Impact: New investment limits and conditions apply, requiring government approval for investments in scheduled and non-scheduled services.
* Action Required: Obtain government approval for investments, comply with SEBI regulations, and ensure security clearances for personnel.
NRIs Investing in Regional Air Transport Services:
* Impact: Continue to be allowed up to 100% FDI in Regional Air Transport Services.
* Action Required: Ensure investments adhere to the conditions specified in paragraph 9.3.1c ii.
Reserve Bank of India (RBI):
* Impact: Responsible for overseeing and enforcing the revised FDI regulations.
* Action Required: Monitor compliance with the new regulations and provide guidance to stakeholders.
Ministry of Civil Aviation:
* Impact: Responsible for clearing imported technical equipment and providing necessary approvals.
* Action Required: Implement procedures for clearing imported equipment and ensure compliance with aviation regulations.
Key Entities Referenced
Reserve Bank of India: The central bank of India, responsible for regulating the country's monetary policy and foreign exchange.
Foreign Exchange Management Act (FEMA): Indian legislation that provides the legal framework for foreign exchange regulations in India.
DGCA: Directorate General of Civil Aviation, the Indian governmental regulatory body for civil aviation.
Air India Limited: The former flag carrier airline of India, now a private entity.
SEBI: Securities and Exchange Board of India, the regulator of the securities market in India.
Mumbai, Maharashtra: The location of the Reserve Bank of India's Central Office.
Ministry of Civil Aviation: The Indian government ministry responsible for the formulation and administration of policies, programmes and projects relating to the civil aviation sector.
Non-Resident Indians (NRIs): Citizens of India who reside outside of India.
Reserve Bank of India
Foreign Exchange Department
Central Office
Mumbai - 400 001
November 25, 2016
CORRIGENDUM
In the Notification of Reserve Bank of India, Foreign Exchange Department No. FEMA.362/2016-RB dated February
15, 2016 bearing G.S.R.No.166 (E) and published in the Official Gazette of Government of India – Extraordinary –
Part-II, Section 3, Sub-Section (i) (hereinafter referred as Gazette Notification)
2. In paragraph 2(C) (iv), S. No. 9.3 and 9.3.1 shall be substituted as under:
9.3 Air Transport Services
(1) (a) Scheduled Air Transport Service/Domestic Scheduled 49% Automatic
Passenger Airline
(100% for
(b) Regional Air Transport Service NRIs)
(2) Non-Scheduled Air Transport Service 100% Automatic
(3) Helicopter services/ seaplane services requiring DGCA approval 1 0 0 % Automatic
9.3.1 Other Conditions
(a) Air Transport Services would include Domestic Scheduled Passenger Airlines; Non-Scheduled
Air Transport Services, helicopter and seaplane services.
(b) Foreign airlines are allowed to participate in the equity of companies operating Cargo airlines,
helicopter and seaplane services, as per the limits and entry routes mentioned above.
(c) Foreign airlines are also allowed to invest in the capital of Indian companies, operating scheduled
and non-scheduled air transport services, up to the limit of 49% of their paid-up capital. Such
investment would be subject to the following conditions:
(i) It would be made under the Government approval route.
(ii) The 49% limit will subsume FDI and FII/FPI investment.
(iii) The investments so made would need to comply with the relevant regulations of SEBI, such
as the Issue of Capital and Disclosure Requirements (ICDR) Regulations/ Substantial
Acquisition of Shares and Takeovers (SAST) Regulations, as well as other applicable rules
and regulations.
(iv) A Scheduled Operator's Permit can be granted only to a company:
a) that is registered and has its principal place of business within India;
b) the Chairman and at least two-thirds of the Directors of which are citizens of
India; and
c) the substantial ownership and effective control of which is vested in Indian
nationals.
(v) All foreign nationals likely to be associated with Indian scheduled and non-scheduled air
transport services, as a result of such investment shall be cleared from security view point
before deployment; and
(vi) All technical equipment that might be imported into India as a result of such investment
shall require clearance from the relevant authority in the Ministry of Civil Aviation.Note: (i) The FDI limits/entry routes, mentioned at paragraph 9.3(1) and 9.3(2) above, are
applicable in the situation where there is no investment by foreign airlines.
(ii) The dispensation for NRIs regarding FDI up to 100% will also continue in respect of the
investment regime specified at paragraph 9.3.1(c) (ii) above.
(iii) The policy mentioned at 9.3.1(c) above is not applicable to M/s Air India Limited
3. The other contents of the Gazette Notification shall remain unchanged.
(Shekhar Bhatnagar)
Chief General Manager-in-Charge
Published in the Official Gazette of
Government of India – Extraordinary
– Part-II, Section 3, Sub-Section (i)
dated 25.11.2016- G.S.R.No.
1089(E)