India Government's green light to Air India disinvestment

The government of India today gave a green light 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 minister (GoM), headed by Jaitley. It will decide on 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, the 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 Corporations of India and Air India SATS (along with Singapore Airport Terminal Services).

The NITI Ayog had suggested complete privatisation of the company. 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 national carrier is saddled with a debt of about Rs 46,500 crore. The previous United Progressive Alliance (UPA) government‚??s turnaround plan of infusing Rs 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 Rs 3,643 crore in FY17, earning a revenue of Rs 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 defense, KPMG.

But Dubey cautioned any delay in the process of 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 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.

Courtesy: Business Standard
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