The Finance Ministry is understood to have given the green signal to the proposal to allow 26 per cent FDI by foreign airlines in the private carriers, many of them facing a cash crunch, with a rider that such investments should not violate Sebi's takeover code.
The Department of Industrial Policy and Promotion (DIPP) had proposed 26 per cent foreign direct investment (FDI) by foreign airlines into the domestic industry in the backdrop of Kingfisher Airlines slipping into a severe debt crisis and several others facing resource crunch.
While approving the draft Cabinet note on FDI in airlines, the Finance Ministry has suggested the (DIPP) consult the Securities and Exchange Board of India (Sebi) on the issue as several airlines, including Kingfisher and Jet Airways are listed companies, sources said.
"We have asked DIPP to consult Sebi so that their regulations do not come in conflict with the Takeover Code," a senior Finance Ministry official said.
Under the Sebi's Takeover Code, an open offer is triggered once an investor acquires 26 per cent stake in a listed company.
The size of the open offer required is 25 per cent, which would mean that the investor will have to buy additional equity from the public.
Several ministries, including the Home Ministry, and the Planning Commission have already backed the proposal.
However, the Aviation Ministry is for fixing a cap of 24 per cent on the FDI.
At present foreign investment up to 49 per cent is permitted in the domestic airlines, but the foreign carriers are disallowed to make such strategic investments.