New 'effectiive control' norm will not apply to Jet-Etihad deal

The Cabinet approval of a revised norm to define ’effective control’ for the purpose of FDI will not apply on the Jet-Etihad deal as it will be applicable only with prospective effect.

“The new definition (of effective control) will be prospective, it will take a while for it to be notified and all regulations accordingly aligned thereafter, including the FEMA guidelines,” commerce and industry minister Anand Sharma told mediapersons after a meeting of the Union Cabinet.

As per the Cabinet decision, ‘control’ will include “the right to appoint a majority of directors or to control the management or policy decisions including by virtue of their shareholding or management rights or shareholders agreement or voting agreements”.

The Foreign Investment Promotion Board (FIPB) earlier this week had allowed Jet Airways to sell 24 percent to Etihad Airways for Rs 2,058 crore after the government ensured that the control of the carrier rests with the Indian promoter.

Finance ministry sources said the new definition of control would not apply to the aviation deal as the FIPB, which is the nodal agency for all foreign direct investments, has already taken a holistic view.

“We have taken into account the broader point of view while deciding on the aspect of ’effective control’ in the Jet-Etihad deal. We have already factored in control aspect while according clearance to it,” a top finance ministry official said.

Etihad is the first carrier to pick up stake in an Indian airline firm since the Cabinet allowed foreign airlines to invest up to 49 percent in Indian carriers. The deal won regulatory nod after a revised shareholder agreement decreased Etihad’s presence on the board of Jet, addressing concerns that Etihad appeared to be taking control of the Indian airline.

PTI