Air India: Divestment of govt stake unlikely this financial year

If privatisation is decided upon, the first cabinet approval will be an in-principle approval

Discussions around privatising Air India might have picked up steam but actually divesting in the carrier will be a long-drawn process, requiring multiple Cabinet approvals.

Senior government officials who are part of the deliberations said, at least two approvals of the Union Cabinet, led by Prime Minister Narendra Modi, could be necessary, and that any dilution of the Centre’s stake was highly unlikely this fiscal year.

If and when privatisation is decided upon, the first Cabinet approval will be an “in-principle” one. This will set the stage for the finance and civil aviation ministries to start the process of valuation of the debt-ridden airline, decide upon the eligibility of buyers and identify prospective suitors and upon the method of sale, and take decisions on what to do with the airline’s assets and its 46,570-crore debt, dealing with employee unions, and hiring financial and legal advisors.

Once this process is complete, the matter will be taken up by the Cabinet again, to give its final approval. Sources said that the draft Cabinet note, which is being circulated among the ministries, was only for the first “in-principle” approval.

“Privatising Air India is a difficult and long-winded process. The way it is being portrayed in certain sections of the media is that a decision is imminent and the sale will happen quickly after a one-time approval by the Cabinet. It is more complex than that and we may need to approach the Cabinet multiple times,” said a senior official.

“Right now, we are only in the initial stages of these deliberations, and are still dealing with a number of issues before any approval is sought,” he added.

As reported by Business Standard earlier, the civil aviation ministry is still said to be considering the option of retaining ownership of the national carrier, and running it after retiring the debt. As part of inter-ministerial discussions, a number of options have been discussed and retaining ownership is one. The options being discussed are either reviving the airline, going for privatisation, or reducing the airline’s debt by selling the assets.

Other issues being deliberated upon deal with the issue of the airline’s lenders’ willingness to convert debt into equity, and whether to sell its subsidiaries —  Air India Engineering Services, Air India Transport Services, and Hotel Corporation of India (owner of Centaur Hotels) — separately. 

The other issues being discussed, according to the official, include whether to go for some sort of a retrenchment by laying off workers through a employee voluntary retirement scheme, and fleet management, and whether foreign companies should be allowed to buy stake in the national carrier.

 India allows foreign institutions to own stakes of up to 100 per cent in local airlines, but overseas airlines can own only up to a 49 per cent stake.