Disinvest in national carrier, let in FDI

UPA-II will virtually have to restart the aviation sector to prevent an otherwise near-certain crash. The economic slowdown has led to a sharp
erosion in number of domestic flyers, affecting bottomlines and sustainability of both airport operators and airlines. Many airlines are now struggling to stay afloat and even existing airports have started levying hefty user-development charges to keep projects on.
Aviation ministry insiders admit that the biggest ‘time bomb’ is the national carrier. UPA-I’s decision to merge Air India and Indian Airlines has led to serious HR issues in the financially troubled entity. The government will now have to take a view on the combined airline’s demand for a Rs 4,000-crore equity-cum-loan infusion.
The airline lost close to Rs 3,000 crore last fiscal and has to fund aircraft purchase of close to Rs 40,000 crore. With the Left out, government may now look at disinvestment of Air India. “When Delhi and Mumbai airports were given to private operators at a time when Left was lending crucial support to UPA in its first two years, nothing stops at the government looking at disinvesting in AI now,” said a senior official.
Private domestic airlines — which along with AI are expected to post losses to the tune of Rs 10,000 crore last fiscal — have their own wishlist for government. The first item on the agenda could be allowing foreign airlines to invest in domestic carriers as currently FDI is allowed only in non-airlines.
The cash-strapped domestic airline industry has been demanding this vehemently. The other demand is for reducing sales tax on jet fuel as states currently levy up to 35%. The aviation ministry has been trying to get jet fuel included in declared goods category so that it attracts a uniform low sales tax rate across the country but opposition from states did not let it happen last time.
21/05/09 Saurabh Sinha/Times of India

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Categories: Indian Aviation- In General May 2009