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India to review PIO investment in aviation sector

    New Delhi: India on Thursday said that it would consider a plan to allow people of Indian origin (PIO) to invest in the aviation sector. The proposal for allowing PIO investment in the domestic airlines has been referred to a Group of Ministers for review by the Central Cabinet. "On the issue of PIO investment in the civil aviation sector, the group of ministers on FDI will be reviewing this issue and taking a suitable decision. It will then come back to the Cabinet," said Union Civil Aviation Minister Praful Patel after a meeting of the Central Cabinet here. The proposal allows PIO investments in domestic airlines at par with Non-Residential Indians. Currently only local residents and Indians living overseas are allowed to own or invest in the aviation sector. The PIO investment issue has for long been pending. A PIO should have at least one parent of Indian descent or is married to an Indian. The foreign equity limit in the aviation sector has been set at 49 percent. Foreign individuals and institutions, but not foreign airlines can currently hold stakes in Indian carriers. Non-Resident Indians and companies in which they hold at least a 60 percent stake, can hold 100 percent stakes in local carriers.

   India's more than decade-old economic liberalisation programme that has encouraged private and foreign investment in industry, has led to explosive growth in some sectors like telecom, but has largely left the aviation industry untouched. Though India is the world's 12th largest economy, high taxes on the aviation industry inflate airfares restricting the size of its air travel market. Still, global interest in the Indian aviation industry is strong as local air travel demand is expected to rise nearly nine percent annually for the next 20 years.
-Jan 19,  2006

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