Air India disinvestment: Modi govt hopes to announce new deal by October

The first Budget of the Modi 2.0 government not only promised to reinitiate the strategic disinvestment of Air-India. But has also set the highest-ever disinvestment target of Rs 1.05 lakh crore for the current fiscal. Underscoring its intent in this direction, Finance Minister Nirmala Sitharaman earmarked just Rs 1 lakh from the budget for the national carrier. Which is reeling under a debt of around Rs 58,000 crore and has thus far managed to stay afloat on a 10-year bailout package of Rs 30,231 crore. In contrast, the Maharajah had received Rs 3,975 crore from government as equity infusion in the last fiscal.

STEPS TO SOLVE ISSUE

Efforts to privatize the flag carrier are already underway in full swing. According to Business Standard, the government is targeting October as the deadline for announcing the deal. “Now that the finance minister has committed in the Budget, we will start approaching prospective bidders,” a source in the know told the daily, adding that the Tata Group will be approached first among the shortlisted potential buyers. The government is expected to reconstitute the Air-India Specific Alternative Mechanism (AISAM) soon, following which it will issue bid documents for Expression of Interest sometime this month.

The AISAM – basically a Group of Ministers – formed in 2017 under the leadership of former Finance Minister Arun Jaitley and charged with giving approvals for the divestment process. The panel had also included former Commerce Minister Suresh Prabhu and Transport Minister Nitin Gadkari. Given that Jaitley and Prabhu are no longer part of the new cabinet, they will be replaced by Sitharaman and Civil Aviation Minister Hardeep Singh Puri. Gadkari expected to continue in the reconstituted panel.

Meanwhile, Air-India Chairman and Managing Director Ashwani Lohani scheduled. To meet all the 13 trade unions on Monday to discuss the terms of privatization.

These unions include Air Corporation Employees Union, Air-India Employees Union, Indian Airlines Technicians Association, Indian Commercial Pilots Association, Air India Aircraft Engineers Association, Air India Cabin Crew Association, Air-India Engineers Association and Aviation Industry Employees Guild. The meeting assumes significance considering that a number of these trade union have vehemently opposed Air India’s privatization.

CONCLUSION

The buzz is that after the failed disinvestment attempt on May 2018. The Centre is now planning to liberalize the terms & conditions for the sale of the airline. At least 95 % stake of Air-India will be up for sale while retaining 5 % for the employee stock. Previously, the government had decided to retain 24 % in the airline. Which believed one of the primary reasons for not generating any interest from buyers.

The changes would also enable merger or reverse merger with any existing business of the winning bidder.

As a precursor to the strategic disinvestment of Air India. The Modi 1.0 cabinet in February approved setting up of a special purpose vehicle (SPV). Air India Assets Holding Company, to transfer Rs 29,464 crore worth loans of the national carrier and its four subsidiaries. The Centre is still pursuing the option of selling latter before the national carrier.

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