Plans afoot to privatise Air India

new delhi — Indian Prime Minister Narendra Modi is actively considering a proposal to privatise state-run Air India, possibly asking the buyer to absorb loans of about ₹200 billion ($3.1 billion) linked to aircraft purchases, a person with direct knowledge of the matter said.

The deliberations follow recommendations by a government panel for the sale of the moneylosing carrier that has nearly $8 billion in debt, the person said. As for the rest of the flag carrier’s debt, the government has yet to decide whether to write off or reorganise it, the person said.

The process may include disposing of Air India’s real estate and other non-core assets worth about $3 billion before the sale or hiving them off, the person said.

Unprofitable for a decade with taxpayers bailing it out in the past six years, Air India’s appeal to any investor is contingent on the government’s ability to write off the debt not backed by assets. That is a political call Modi needs to take at a time when many of the nation’s state-run lenders have been seeking capital injection from taxpayer funds amid mounting bad loans.

“Air India is a good vehicle for an investor if the non-aircraft related debt is taken care of and the balance sheet is cleaned up seriously and completely,” said Kapil Kaul, South Asia CEO at Sydney-based Capa Centre for Aviation.