In the latest development in privatisation of Air India, the government is ready to give away 100% of the company and will soon invite bids for the same, reports Mint. There have been attempts made earlier to bring in a private partner but those have failed to fetch any results. The government is hoping that this time at least there will be a suitor to take over and run the airline.
The first step is to release the expression of interest document. The indications are that this might happen this month itself. There is a high-powered ministerial committee looking into the disinvestment in Air India. It has Amit Shah, the Home Minister at its helm with the Finance Minister Nirmala Sitharaman, Civil Aviation Minister Hardeep Puri and the Railways and Commerce Minister Piyush Goyal as its members. The panel has already had its first meeting and is likely to clear the expression of interest document in its next meeting to set the ball rolling.
The significance of disinvestment in Air India cannot be overlooked as far as the government is concerned. The recent announcement in the cut in corporate tax has left its revenue collection down by Rs 1,45,000 crore. If some incomes are not generated through these disinvestments, then the fiscal deficit by March 2020 could put the government in a spot. Even otherwise, the Finance Ministry has set an ambitious target of Rs 1,05,000 crore inflow from disinvestment in this financial year. This target will not be achieved if Air India’s sale does not go through.
However, it is not going to be very easy for the government to find a buyer ready to take over the government-run airline. One big factor is the debts the airline has accumulated over the years. The other important factor is the current regulation in the policy that states a foreign airline cannot hold more than 49% equity in an Indian carrier. Will a private investor with no airline background be willing to invest such huge sums in Air India? Or will the government tweak the policy as a one-off case to see the end of its funds-drain in a loss-making business?
Industry observers will be watching these developments closely since the other airline that went under, Jet Airways has not been able to find a buyer despite great efforts.
The only positive aspect is the government is fully aware of the issues involved and has taken some steps to make is easier for the prospective investor to consider the acquisition of Air India. The government has floated a special purpose vehicle Air India Assets Holdings Ltd and transferred a bulk of the Rs 33,000 crore debt on the airline’s books. Simultaneously, a lot of non-core assets too have been transferred to this SPV.
With this arrangement, an investor will look at a running airline business with 128 aircraft and the debts which may be common to any airline and so on. Some experts claim it might prove to be an attractive asset to acquire for a bold investor.