Foreign investors will not hold more than one-third of board positions in Indian carriers, reports Business Standard.

The government is expected to put stiff conditions on investments by international companies in Indian carriers, even though it had raised the cap on foreign investment in the sector from 40 per cent to 49 per cent last year.

According to a new proposal, foreign investors will not be allowed to hold more than one-third of board positions in Indian carriers. The remaining members and the chairman of the board will have to be Indian citizens. Indian carriers will also not be allowed to enter into management contracts with a foreign airline.

As per the present norms, foreign equity participation up to 49 per cent is allowed in an Indian carrier, though non-resident Indians and overseas corporate bodies (OCBs) can hold up to 100 per cent stake. Investments by foreign airlines are, however, not allowed in an Indian carrier.

According to sources, the government would come out with stipulations that would require substantial ownership and effective control of a joint venture company to be vested with Indian nationals.

It is expected that the guidelines will stipulate that the joint venture agreement as well as the articles of association of the company should have conditions that stipulate that the management control will stay with the Indian company.

The government is also expected to permit domestic air-service operators to enter into financial arrangements with banks or financial institutions for the purpose of lease- finance, hire-purchase or other loan arrangements, such an arrangement will not be permitted with a foreign airline.