New Delhi: In a move aimed at boosting the cash-strapped aviation sector, the government on Friday decided to allow foreign airlines to pick stakes up to 49 percent in private Indian carriers, which was immediately welcomed by the industry.

The decision of Cabinet Committee on Economic Affairs to permit foreign airlines to invest in scheduled and non-scheduled air transport services would pave way for much-needed equity infusion into Indian carriers which are in dire need of funds for operations.

"Higher foreign investment inflows are necessary at the present juncture in order to strengthen the sector," a government statement said.

Briefing mediapersons on the CCEA decision, Commerce Minister Anand Sharma said the existing policy in aviation sector allowed FDI upto 49 percent and it was allowed for the non-scheduled operator but not for scheduled operators.

"The government has now permitted foreign airines to invest, under the government approval route, in the capital of Indian companies operating scheduled and non-scheduled air transport services, upto the limit of 49 percent of their paid up capital," he said, adding strategic investors will come in when they have stake.

Introduction of global best practices, concomitant with the induction of FDI from foreign airlines, is expected to lead to higher service standards and induction of state-of-the-art technologies in the air transport sector, the government statement said.

Indian private airlines have been demanding permission to foreign airlines to invest as they have been facing severe cash crunce on account of high taxes on aviation turbine fuel, rising airport fees, costlier loans, poor infrastructure and competition. Except IndiGo, all airlines have posted losses in the financial year ending on March 31.

(Agencies)

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