The Cabinet Committee on Divestment yesterday decided to sell off 60 per cent government equity in Air-India.
Of this, 40 per cent will be offered to a strategic partner who will be allowed to take over management control of A-I and bring in a foreign airline with a 26 per cent stake.
In a post-meeting briefing, divestment minister Arun Jaitley said, "Overall, of the 100 per cent in Air-India, a minimum 74 per cent stake, at any given time, will be in Indian hands."
According to government officials, the move will give the entire divestment process a big boost.
However, this decision is markedly different from the earlier proposal of the civil aviation ministry that a 75 per cent stake in A-I be retained under Indian control and the balance offered to foreign bidders, including airline companies, as the strategic partner.
Explaining the new arrangement, Jaitley said the government would retain 40 per cent and offer another 40 per cent to the strategic investor, while 10 per cent each will be divested to Air-India employees and domestic financial institutions.
The officials clarified that if a foreign airline wanted to pick up a stake in Air-India, it would have to form a joint venture with an Indian partner offering a 14 per cent stake. But an Indian corporate will be entitled to hold the full 40 per cent stake in the carrier.
The minister also said the government decided to appoint a global advisor to help the Cabinet committee manage the divestment process.
On management control, Jaitley said the strategic partner would be allowed to manage the national carrier. And, thus, he set at rest the controversy between the divestment department and the civil aviation ministry.
The divestment department expressed doubts about investor response if the strategic investor's holding limit was set at 25 per cent without any control on management.
Interestingly, the selloff proposal is in line with the divestment commission's recommendations, the only difference being the foreign equity level which had been pegged at 30 per cent by the commission.
Also, the present proposal does not link the Hotel Corporation of India selloff with A-I divestment and there will be no infusion of fresh equity in A-I. Earlier, it was proposed that the government pump in Rs 1,000 crore as equity while bringing down the Centre's shareholding.
Jaitley also told reporters that the Cabinet had decided to divest 74 per cent in Hindustan Teleprinters Ltd from the earlier proposal of 50 per cent.
The Cabinet committee also decided on the broad milestones for divestment of government stakes in National Mineral Development Corporation and Pawan Hans. But the sources declined to divulge the details of the decision.
They said a decision on Kudremukh Iron Ore Company Ltd could not be taken as the Karnataka government had not renewed the 30-year lease which expired recently. "The Cabinet thought that the present one-year lease will not help in valuation and the government will not be able to get a good price," the sources added.
