New Delhi: Government today (Oct 20, 2004) hiked Foreign Direct Investment (FDI) cap for domestic airlines from 40 to 49 per cent through the automatic route but barred foreign airlines from picking up direct or indirect equity.

The decision will ensure that FDI investments in the domestic airlines need not go through the Foreign Investment Promotion Board, Finance Minister P Chidambaram told reporters after a Cabinet meeting.

The meeting also approved 100 per cent FDI in domestic airlines by NRIs and Overseas Corporate Bodies through the automatic route.

The Government would, however, not allow direct or indirect equity participation by foreign airlines.

Earlier the celings on FDI in respect of Air Transport Services (Domestic Airlines) stood at 40 per cent with prior Government approval of FIPB (Foreign Investment Promotion Board).

The 100 per cent NRIs/Overseas Corporate Bodies were earlier allowed with prior Government approval.

The other conditions remain the same, he said.

By raising the FDI cap, the domestic scheduled and non-scheduled airlines will get more equity from foreign investors and this would increase their competitiveness, according to a release issued after the meeting.