Giving in to yet another demand of Singapore Airlines (SIA), the government has said it is willing to sign an agreement with its strategic partner to the effect that post-privatisation it will not invoke Section 9 of the Air Corporation's Act, 1953.
The Section allows the government to issue directions to A-I even after the strategic sale, thereby, thwarting the new owner's attempt to turn around the airline.
Only yesterday had disinvestment minister Arun Shourie told Parliament that the Prime Minister himself had asked the department of disinvestment to expedite the divestment process of A-I.
The development assumes significance because SIA is known to be reconsidering its bid for A-I. The government's response to the demand raised by SIA during informal rounds of negotiations, at a stage when the foreign airline has said that it is reconsidering its bid for A-I, reflects its eagerness to ensure that the privatisation is achieved.
This is not the first time that the government has favourably responded to concerns raised by the bidders.
A fortnight ago, in response to reports that SIA wanted to raise its stake in A-I, the government had reacted positively by saying that it could raise its holding to 49 per cent subject to the mandatory clearances. The clarification had come in response to reports saying that SIA had decided to withdraw from the race for A-I because it wanted a 49 per cent stake in the carrier.
Government officials had, however, said that SIA had submitted an expression of interest only for 19 per cent government stake in A-I and had at no point of time asked for 49 per cent equity.
Top civil aviation ministry officials told Business Standard that the bidders, in particular SIA, have already been given an informal intimation about the decision. A-I is an independent company for which the government does not require such an Act any more, they added.
"Since we are going to give up management of the airline, there is no way we would issue any directions to them (strategic partner). They can run the airline as they desire. We are open to signing an agreement," the officials said. An amendment to the Act, however, would not be possible for political reasons, they added.
The officials had earlier said that SIA representatives had, during informal rounds of negotiations, asked several times for the amendment to the Act.
A-I is the only public sector unit that continues to be governed by such an Act, even after it was converted into a public limited company and registered under the Companies Act, 1956.
"The Section needs to be viewed in the light of the Enron imbroglio where everything had been laid down in black and white," a source said.
