Friday, June 02, 2017

Air India selloff: Government should exit completely, national carrier tag redundant now

New Delhi: Should the government retain a minority stake in Air India to preserve the ‘national carrier’ tag, even after it agrees on the modalities to sell off this loss-making airline? If retaining a minority stake would be the consensus among the wise men in New Delhi tasked with Air India’s future, it would indeed be a travesty. The national carrier tag was important in the decades when India was a closed economy, when Air India was the sole airline operating on the domestic as well as on international skies and when it was thought to represent Indian hospitality.

But today, when private airlines own a majority of the domestic market by passengers and when overseas routes too are no longer a monopoly of the Maharaja, what sense does it make for the government to retain any control whatsoever in Air India? The airline needs to be handed over in entirety to a private bidder, as and when the selloff process begins. Not only will this intent of complete exit provide assurance about government’s sincerity regarding the selloff, it would also signal complete freedom for the new owner to take critical decisions – even with a minority equity share, the government may otherwise well interfere in decision making.

Speaking at an interaction with media today, Niti Aayog Vice Chairman Arvind Panagariya said that though his organisation has already given its recommendations on Air India selloff, the government has to take a call on several crucial aspects of the proposed sale:

1) Whether the airline should be sold off at all

2) If the decision is in favour of a selloff, then should the universe of buyers include foreign buyers or should the sale be restricted to Indians?

3) Should the government retain some stake in the airline to retain its ‘national carrier’ tag

4) Should the entire Rs 52,000 crore debt on Air India’s books be written off or should only a part of this be written off by the government.

Panagariya said that Niti’s recommendations have been submitted to the Prime Minister’s Office, and now the PMO along with the Ministry of Civil Aviation will have to take a call on the selloff. While declining to divulge details of his recommendations on Air India disinvestment, Panagariya was quite clear that the current debt on the airline’s books was “very very large and selling it with this (debt) will be very very difficult. Even if the sale were to be open to both, domestic and foreign buyers, will the government write off the entire debt or only a part of it – that decision needs to be taken”.

An official close to developments had told Firstpost earlier that it is possible to break up Air India into two distinct parts: 1) The airline itself with aircraft and related assets and 2) Air India’s subsidiaries and the real estate. This official had said that the sensible way to get maximum value in any selloff would be to offload just the airline to a prospective buyer. The government could then simultaneously dispose off the subsidiaries and real estate for a total consideration of close to Rs 20,000-21,000 crore. In fact, an inter-ministerial group has already begun deliberations in the second part, specifically on monetising land assets.

The same person had further said “All this is known to people involved in the selloff process. Now, the ball is in DIPAM’s (Department of Investment and Public Asset Management) court. Once DIPAM accepts the proposal drafted by Niti Aayog, things will move forward. DIPAM will take the proposal to the Cabinet Committee on Disinvestment. If this committee approves the proposal, then ads will be put out for transaction advisors and valuers.” DIPAM is expected to form several committees to examine and fine tune the selloff process, comprising top officials of the ministry of civil aviation, Air India, Finance Ministry and DIPAM itself - the entire selloff process of Air India could take at least 8-12 months.
02/06/17 Sindhu Bhattacharya/First Post