The Narendra Modi government is lining up Air India for privatisation, but there’s a four-letter word that could stall the national carrier’s takeoff: debt.
EY, the firm appointed to advise the government on the transaction, is expected to work out its total debt by February, and the liabilities may be larger than so far estimated.
“The ballpark debt that is being talked about, around Rs52,000 crore (over $8 billion), is last year’s figure. The overall debt is likely to be larger,” a senior government official involved in the disinvestment process told Quartz, requesting anonymity. “They have been given time till February.”
Bureaucrats in the civil aviation and finance ministries are also working around the clock to figure out just how much liability the carrier is saddled with because, unless that number is settled, the government will be unable to move ahead with negotiations.
If Air India’s debt is significantly higher than estimated, the government may also have to alter its strategy and take on a large percentage of the carrier’s financial obligation to ensure it remains an attractive deal. Meanwhile, authorities are working out a reasonable amount of debt that can be sold along with the units.
“It was never the government’s intention that the entire debt would have to be bought anyway. But a reasonable amount has to be packaged to be sold off,” the official said.
18/01/18 Anwesha Ganguly/Quartz
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