With FIPB in its last meeting deferring a decision on Jet Airways proposal to induct Etihad as a partner over the issue of control of the Indian carrier, the Department of Industries Policy and Promotion (DIPP) suggested two options -- addressing the issue of 'effective control' through FIPB and referring the matter of FDI limit to an inter agency group.
Sources with direct knowledge of the development said Commerce and Industry Minister Anand Sharma has ruled out referring the proposed deal to any more groups.
Last September, the Cabinet had allowed foreign airlines to take up to 49 percent stake in domestic carriers. It did not alter the existing rule of 100 percent NRI investment.
The rules, however, remained vague in cases where a foreign airline is picking up stake in a carrier where there is already NRI investment (technically treated as FDI).
In case of the Jet-Etihad deal, the ministry wants the investment to be treated separately, sources said.
It may be noted that Jet Airways promoter Naresh Goyal is a Non-resident Indian (NRI).
Sharma, sources said, was of the view that it was not the Cabinet's intention at the time of taking the September decision, to be regressive or withdraw the dispensation for NRIs.
They, however, said all these issues will be put up before the next FIPB meeting. "And the FIPB recommendations after that will go to CCEA."
FIBP, which had sought inputs from concerns quarters including SEBI on effective control of Jet Airways post Etihad entry, is to consider the deal for approval on July 29.
Since the time Jet announced that it would sell stake to Abu Dhabi-based Etihad, the proposed deal has been mired in controversies for one or other reason.
Serious concerns were raised by several politicians particularly on the control and ownership and Jet shifting its base to UAE.
While Finance Ministry had written to Jet Airways seeking clarity on the ownership structure, SEBI stated that any entity acquiring control of a listed Indian company would need to make an open offer for public shareholders.
Sources said as per the shareholder agreement and governance agreement submitted by Jet before the FIPB meeting last month, the final ownership of the company goes into the foreign hands.
As per the deal between Jet and Etihad, the Abu Dhabi carrier is acquiring 24 percent stake in the Indian airline company. However, there have been concerns that Etihad was getting voting rights and other powers in excess of those equivalent to its proposed 24 percent stake.