Sunday, June 25, 2017

Govt divided over Air India future

New Delhi: The civil aviation ministry will prefer to sell off Air India's subsidiaries to partially clear the national carrier's huge debts rather than go in for an immediate privatisation.

The ministry has objected to Niti Aayog's proposal to sell off Air India as there will be no takers given the huge debt of Rs 52,000 crore.

All the options to restructure Air India's debt for a turnaround, including the Niti's Aayog's suggestion on privatisation, are expected to be taken up by the cabinet this month.

According to the civil aviation ministry, hiving off some of Air India's subsidiaries such as the engineering and ground handling units could raise cash; this and the restructuring of debt could nurse the airline back to health.

×"Trying to sell something which has few takers is bad strategy... and spending money to sell something is even worse," said top civil aviation ministry officials.

At the preliminary inter-ministerial meetings, the ministry has questioned the proposal to write off debts or restructure them just to make the carrier attractive to a private buyer.

If such a step is indeed taken, the government can itself run the airline as Air India has started making profits, instead of bringing in a private party. Air India had made an operating profit of Rs 105 crore in the last fiscal.

"We are saying that if the cost of privatisation is the government having to write off debt, then is it worth it?" officials said.

Till now, the finance ministry has staved off any loan write-off plans, while the lenders are not too keen to restructure without seeing some money on the table.

Officials consequently feel selling off subsidiaries could be a better way to earncash that could be brought to the table while negotiating a debt recast with lenders.

Some of Air India's subsidiaries are ground handling arm Air India Air Transport Services, Hotel Corporation of India (which owns Centaur at Delhi and Lake View in Srinagar), the charter business as well as engineering arm Air India Engineering Services.

Officials feel the sale of the subsidiaries or even the sale of strategic stakes in them could fetch between Rs 20,000 crore and Rs 25,000 crore.
25/06/17 Jaynta Roy Chowdhury/Telegraph