Foreign airlines will be allowed to acquire no more than 49% of Air India (AI, Mumbai Int'l) in the upcoming attempt to privatise it, nor will they be able to obtain complete operational control, the Economic Times has reported.

The Indian government has rejected a plan to dilute the Substantial Ownership and Effective Control (SOEC) clause in its foreign direct investment guidelines for the airline sector. This is something official sources had said in December that the Department for the Promotion of Industry and Internal Trade had been discussing with the Civil Aviation Ministry.

“There was a proposal to relax the SOEC norms, but the aviation ministry has rejected the proposal on the grounds that it would give away the airline sector to foreigners and would mean the Indian government losing control over airlines in India,” a senior government official close to the matter told the newspaper.

Under the clause, even with 49% foreign airline ownership, more than 60% of board members and the chairman must be Indian nationals. The operational headquarters must also be in India.

The proposal to change the SOEC had been discussed within the government, the official said, but it had not been sent to the committee led by Minister of Home Affairs Amit Shah that has been supervising the sale of the carrier.

“Airlines have shown interest in Air India, but we would like to wait for the final bids to come. The expectation is that not an airline but a consortium would bid for an airline of this size,” the Economic Times quoted the official as saying.

Local media have reported that representatives from both IndiGo Airlines (6E, Delhi Int'l) and Etihad Airways (EY, Abu Dhabi Int'l) have met government officials about acquiring a stake in the national carrier.