The Centre on Wednesday permitted NRIs to grab 100 per cent stake in disinvestment-bound Air India.

The decision comes at a time when the government has sought preliminary bids for 100 per cent stake sale in the national carrier.

The decision was taken at a meeting of the Union cabinet chaired by Prime Minister Narendra Modi.

However, foreign investments in the national carrier, including that of foreign airlines, will not exceed 49 per cent, either directly or indirectly, an official statement said.

The statement said substantial ownership and effective control of Air India will continue to be vested in Indian nationals.

Although 100 per cent FDI is permitted under automatic route for NRIs in scheduled air transport service/domestic scheduled passenger airlines, it is restricted to be only 49 per cent in Air India, the statement said.

“To permit foreign investment up to 100 per cent by those NRIs who are Indian nationals, in case of Air India Ltd, the Union cabinet... has approved to amend the extant FDI policy to permit foreign investment in Air India Ltd by NRIs, who are Indian nationals, up to 100 per cent under automatic route,” the statement said.

The statement said that in light of the proposed strategic disinvestment of 100 per cent of Air India by the Modi government, it has been decided that foreign investment in Air India be brought on a level playing field with other scheduled airline operators.

The national carrier will have no residual government ownership and will be completely privately owned.

The amendments “are meant to liberalise and simplify the FDI policy to provide ease of doing business in the country”, the statement said, adding it would lead to the largest FDI inflows and thereby, contribute to growth of investment, income and employment.

Addressing the media on the issue, Union minister Prakash Javadekar said this was a milestone decision.

Allowing 100 per cent investment by NRIs in the carrier will also not be in violation of substantial ownership and effective control (SOEC) norms. NRI investments will be treated as domestic investments.

Under the SOEC framework, which is followed in the airline industry globally, a carrier that flies overseas from a particular country should be substantially owned by that country’s government or its nationals.

Further, Javadekar said that due to a series of steps taken by the government to relax FDI norms in areas such as contract manufacturing, single-brand retail trading and coal mining, FDI has increased significantly and India has become a major destination for foreign investment.