Opinion favours selling off Air India in one go

There won't be any gradual stake sale once a final decision to divest stake is taken

Privatising Air India in one go is a view that has emerged strong among the many that the Narendra Modi government is grappling with regarding the future of the airline.

Business Standard has learnt from sources who are involved in this process that once a final decision to divest a stake in Air India is taken, there won’t be any gradual stake sale. In a single stroke, the government will cede control by reducing its stake to either below 49 per cent, or exit the national carrier completely.

“No investor, domestic or foreign, will be interested in buying a minority stake in Air India. There won’t be a 10, 15, 20 per cent stake sale. It has to be privatisation in one go. The decision to be taken is whether the government will bring down its ownership to below 49 per cent or exit altogether,” said a senior government official.

The official said that a number of departments in the government, including the Prime Minister’s Office, civil aviation ministry, and finance ministry, are considering various options regarding the national carrier, which is laden with a debt of Rs 46,570 crore.

A number of informal discussions have taken place on this. The consensus view is that there is no sense in the Centre divesting stakes and retaining ownership. The final decision would be taken by the cabinet in the next couple of months, sources said.

It is clear that before any attempt to privatise is made, the debt will have to be dealt with. To that extent, Air India is looking to sell some of its real estate assets. And public-sector banks will soon start a fresh round of discussions with the airline to recast part of the debt.

The official quoted above said that the privatisation process was not contingent upon the discussions around debt. “Talks on retiring or recasting debt can and will take place alongside any discussion on privatisation. It is not that we wait for the debt burden to lighten and then start the divestment process,” the official said.

This will ensure a time-bound process that will not stretch over multiple quarters. However, the official said that it was too early to comment on whether Air India would count in the ambitious disinvestment target of Rs 72,500 crore for 2017-18.

If the decision is to sell, the government is confident that a good suitor can be found. “Leaving aside the debt issue, Air India is on a strong footing operationally. It has a great value in terms of fleet and international routes. Its flight crews and other staff have more experience than domestic competitors,” the person said. 

At a press conference on three years of the Modi government on Thursday, Union Finance Minister Arun Jaitley said the government was studying the NITI Aayog’s recommendations on Air India. The Aayog had tweeted on Friday that the government had to take a call on four issues, namely, whether the national carrier needed to be sold or not, whether the bids would be open to foreign or only domestic investors, whether the Centre should maintain any stake at all, and whether the debt should be cleared.