Govt may sell 100 per cent stake in Air India: Report

The government may sell 100 per cent stake in debt-stressed Air India after it failed to receive even a single bidder in its first attempt of privatisation. Earlier, the Narendra Modi government wanted to offload 76 per cent stake, that experts believe turned out as a roadblock in the strategise disinvestment of the state-run national carrier.

Business Standard today reported that the government is considering revising the terms of sale for Air India after it failed to draw any response. The discussion of selling 100 per cent stake began after the government’s transaction advisor for the disinvestment EY submitted a detailed analysis as to why the first attempt of sale process fell flat.

According to the report, the EY in its analysis found that the government’s offer to sell only 76 per cent and a clause to retain employees for a year turned out to be the major roadblocks in the deal. The government is expected a call based on EY’s report.

“A core group of secretaries on Air India’s divestment is expected to meet soon on the matter and firm up its next plan of action. Based on this panel’s recommendations, the Group of Ministers on Air India will take a decision,” the BS quoted an official as saying.

Ever since the government rolled out a detailed preliminary information memorandum on the stake sale, analysts found some of the terms and conditions a bit more stringent. In its memorandum, the government offered to sell 76 per cent stake in Air India – 100 per cent in its subsidiary Air India Express and 50 per cent in its ground handling staff. It also added a clause for Air India staffs that their jobs would be protected for at least a year from the date of final deal.

Initially, several domestic and international players – IndiGo, Tata Sons, Jet Airways, British Airways and Lufthansa – had shown their interest but later they backed out citing unsuitable terms of conditions put forward by the Centre. Analysts suggest no airline would come forward to buy the carrier if the Centre insists on retaining 26 per cent stake in Air India.

Recently, the Centre informed that no bids were received for Air India’s strategic disinvestment as the deadline for the submission of Expression of Interest ended on May 31. Days after the announcement, Air India asked the government to restore equity infusion which was stopped earlier.

The Congress-led UPA government had approved a turnaround plan under which Air India was to receive a total equity infusion worth Rs 30,231 crore up to 2021. So far, the state-run airline has received more than Rs 26,000 crore under the bailout package.

Air India is a loss-making airline which has an outstanding debt of Rs 48,781.3 crore as on March 2017.businesstoday