After it failed to get any buyers for the debt-ridden national carrier, the government has shelved its plan to privatise Air India exactly a year after the Union Cabinet gave its nod for the disinvestment process.
“Now is not the right time to privatise Air India. We received no bids. We will look at improving efficiencies by bringing private people to work with the airline’s top brass,” the source told The Hindu .
He added that measures such as cutting down costs as well as monetisation of Air India’s assets will be adopted in order to run the airline.
The source attributed the lack of interest in the disinvestment process to rising fuel prices and hinted that the government could revisit the plan to offload its stake in Air India at a later stage.
The decision was taken at a meeting convened by senior BJP leader and Union Minister Arun Jaitley on Monday.
The broad contours of Air India’s privatisation were made public in March-end and interested players were invited to place initial bids.
However, when the deadline to submit the bids ended on May 31, no player came forward to express its interest in buying the airline.
The government had offered to sell 76% of its stake in Air India, along with low-cost subsidiary Air India Express and its 50% share in ground handling arm AISATS as a single entity. The buyer would have to take on the debt and current liabilities of ₹33,392 crore.
Many players had raised questions about the huge size of the debt, the government’s refusal to exit completely from the airline as well as sought clarity on the benefits and obligations towards more than 15,000 permanent and contractual employees.
However, the government had said that continuing to hold some stake in Air India would help it to service the share of the debt of approximately ₹25,000 crore it was not passing on to the new buyer.
Aviation think-tank CAPA says the government’s decision does not bode well for the beleaguered airline.
“We are disappointed with the government’s decision not to go ahead with AI’s divestment. Continuing government ownership and the lack of a clear road map will lead AI to extreme insignificance and possibly closure. There will never be a perfect timing for AI divestment as conditions for divestment have to be structured by some bold decisions,” said Kapil Kaul, CEO & Director, CAPA South Asia.
He said the government will have to focus on comprehensive restructuring of the airline under a special administration to scale down losses significantly.
The airline has already sought short-term loans of ₹1,000 crore after it was unable to pay the salaries of its employees earlier this month.
A turnaround plan approved by the UPA-2 government in 2012 provided for financial assistance to the tune of ₹30,000 crore over a 10-year period for the carrier. Of this, the airline has received more than ₹26,000 crore. It was also required for the airline to monetise its land assets and generate ₹5,000 crore over a 10-year period until 2021 but the airline has only been able to garner a mere ₹445 crore, as per the government in Parliament in February.
