Thursday, November 03, 2016

A win-win flight

The Cabinet move to divest stake in Pawan Hans Helicopter (PHHL) can help the ailing state-owned chopper firm take off again. The company holds immense potential despite a chequered past.

Pawan Hans was set up in 1986. Initially, it only had a fleet of Westland and Dauphin helicopters. The Westland machines had been given as a grant-in-aid by the British Government. The company ran into trouble soon as several of its helicopters crashed. In 1991, the Government decided to ground the entire fleet after the Directorate General of Civil Aviation raised safety issues. PHHL had to sell the entire Grant in Aid fleet and deposit the money in Government coffers. Oil PSU ONGC and the Centre became primary equity owners in PHHL.

PHHL’s woes did not end there. The Government’s financial requirements lay down that in the case of project tied aid (which is what helped PHHL start) the Company has to repay the amount to the Government. This meant PHHL had to pay ₹ 130.9 crore failing which there would be a penalty of 18 per cent interest per annum. Between 1986 and March 2001, the Company owed ₹ 339 crore to the Government as interest on the principal. The amount that PHHL owes was frozen at about ₹480 crore.

Fifteen years later, when the Government is moving towards divesting its stake in PHHL, many believe the Company could use the prevailing business environment to its advantage.

For starters, the Government now allows 100 per cent FDI in aviation and the Finance Ministry has indicated its “willingness” to waive the outstanding amount against PHHL, making it a hot favourite among foreign companies looking to invest in India.
02/11/16 Ashwini Phadnis/The Hindu Business Line

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