Indian authorities on Friday delayed approval of a plan by Abu Dhabi-based airline Etihad to acquire a stake in Jet Airways, as they sought more details on ownership of the merged carrier.
The Jet-Etihad deal, announced in April, is the first overseas investment in an existing Indian carrier since New Delhi eased restrictions to allow foreign firms up to a 49 per cent stake in the country's airlines.
Etihad will pick up a 24 per cent stake in Jet Airways under the agreement.
The government's Foreign Investment Promotion Board deferred the decision on the 20.6-billion rupee (US$389 million) deal - the largest foreign investment in the Indian aviation sector - saying it needed more information.
"It (Jet Airways-Etihad proposal) has been deferred. We need more details of the effective control and ownership," Economic Affairs Secretary Arvind Mayaram told reporters in New Delhi after the panel meeting.
India's market regulator and competition watchdog has also sought more information from the domestic carrier about the transaction.
They want to make sure that Etihad's ownership powers in Jet remain in line with its plan to take a 24 per cent stake in the company's expanded share capital.
The delay comes as the Congress-led government, which is desperately seeking foreign investment to upgrade dilapidated infrastructure such as highways and ports, has been promising to make it easier to conduct business in India.
Under the agreement, which capped months of discussions between the two airlines, Jet owner-founder Naresh Goyal will retain 51 per cent of the airline.
The Etihad investment will allow Jet to reduce its hefty debt and expand its global reach by using the UAE airline's network.
In March, the foreign investment panel cleared a proposal by AirAsia to set up a joint venture airline company with the giant tea-to-steel Tata conglomerate and another partner.
Airlines had been wary of investing in India because of its infamous red tape and the two foreign carriers' investment had been seen as a sign that India's passenger market was too big to ignore.
Still, even with a rapidly expanding middle class that has switched to air travel from the country's main mode of transport by train, the airline market has been under pressure due to fierce competition among carriers.
SOURCE
A little hiccup, but it will probably go through. With Etihad and AirAsia coming into the Indian market, it will be interesting to see how they will help the aviation field over there improve.
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