Air India stake sale takes off Cabinet gives in-principle nod, group of ministers to fix disinvestment process OUT OF GOVT HANDS
The government on Wednesday gave in-principle approval for disinvesting stake in state-owned Air India. Whether or not the airline will be fully privatised is not yet known. “The Cabinet has accepted the recommendations of the NITI Aayog and has given an in-principle nod for disinvestment of Air India and its five subsidiaries,” said Union Finance Minister Arun Jaitley. He, however, did not give a timeline for the process.
The government will now have to set up a group of ministers (GoM), headed by Jaitley. It will decide how much stake will be sold and the process of disinvestment. Some of the issues that the GoM will deliberate upon are how to tackle the unsustainable portion of Air India’s debt, eligibility criteria for bidders, hiving-off assets to a shell company, and disinvestment of the airline’s profit-making subsidiaries.
Air India has five subsidiaries — Air India Engineering Services, Air India Transport Services, Air India Charters, Hotel Corporation of India and Air India SATS (along with Singapore Airport Terminal Services). The NITI Aayog has suggested complete privatisation. During an inter-ministerial discussion, the Ministry of Civil Aviation had recommended selling Air India’s assets and profit-making subsidiaries to reduce debt. The state carrier is saddled with debt of ~46,500 crore. The previous United Progressive Alliance (UPA) government’s turnaround plan of infusing ~30,000 crore showed little improvement in the financial metrics of the company. The Atal Bihari Vajpayee government before it had also planned to disinvest stake in Air India, but found no buyers. The company reported a loss of ~3,643 crore in FY17, earning a revenue of ~22,521 crore.
Experts welcomed the government’s decision. “Air India’s privatisation has been long overdue. Every year’s delay has only cost taxpayers and eroded its market value,” said Amber Dubey, partner and head of aerospace and defence at consultancy KPMG.
Dubey also said delay in the disinvestment will erode Air India’s market value. “There is also a time factor. If we wait for Air India’s books to be cleaned up by Some important PSUs that were privatised since 1999-2000 way of debt restructuring, the negotiations, board approvals and legalities involving various lenders may take a very long time. Air India’s valuation will only go down further. The asset-leasing option in turn can be implemented quickly and the debt restructuring can be done later,” he said.
THE FLIGHT SO FAR
1932: JRD Tata establishes Tata Airlines 1948: The government acquires 49%, starts operation as Air India International 1953: The government buys out the company 1962: Air India International rebranded as Air India 2000: The Atal Bihari Vajpayee government clears proposal to disinvest stake in both Air India and Indian Airlines 2007: Air India and Indian Airlines merge; renamed National Aviation Company of India 2012: United Progressive Alliance govt approves turnaround plan and decides to infuse ~30,000 crore till 2021 2017: National Democratic Alliance govt gives in-principle approval for disinvestment
Aviation think tank CAPA also said on Wednesday subsidising Air India by pumping in hundreds of millions of dollars is not desirable. “Subsidising Air India to the tune of hundreds of millions of dollars is… not desirable for a government which has so many other pressing economic and social priorities.”
The government’s role as a major operator in the aviation sector through its ownership of Air India and the Airports Authority of India will continue to be a negative influence on policy outcomes, its report said.
Employees of the airline, however, will not be too happy with the divestment decision. Seven of their unions had earlier warned the government of large-scale protests if the NITI Aayog proposal to privatise the national carrier was approved.
Before the Cabinet decision was announced on Wednesday evening, an employees’ union met NITI Aayog Chairman Arvind Panagriya and demanded that the government waive the airline’s debt, instead of selling it to a private player.
Expressing concerns about the uncertain fate of 25,000 employees, the union representatives have also demanded that if Air India is privatised, their salary dues should be cleared. Another union is planning to meet Prime Minister Narendra Modi.