Air India privatisation: Govt sets Rs 5,000 crore as minimum net worth criteria for bidders

The government has set Rs 5,000 crore as the minimum net worth criteria for those looking to bid for state-owned Air India

FP Staff March 23, 2018 18:01:36 IST
Air India privatisation: Govt sets Rs 5,000 crore as minimum net worth criteria for bidders

The government has set Rs 5,000 crore as the minimum net worth criteria for those looking to bid for debt-ridden Air India, a media report said.

Government sources had earlier stated that the net worth criteria would be fixed at Rs 1,000 crore. However, according to The Economic Times, the government has raised the net worth criteria in order to block frivolous and dubious contenders.

“The minimum net worth criteria for companies or consortiums bidding for Air India has been set at Rs 5,000 crore. But to allow participation from domestic airlines — many of which have negative net worth — it has also been decided to allow them to bid provided they form a consortium that has a net worth of over Rs 5,000 crore,” a senior government official told the newspaper.

Air India privatisation Govt sets Rs 5000 crore as minimum net worth criteria for bidders

Representational image. PTI

On 19 March the Business Standard reported that the Core Group of Secretaries on Disinvestment (CGD) had suggested that a company with a proven track record of running a successful airline be allowed to bid, even if its net worth is negative.

“The committee of secretaries opined that aviation as an industry often has to withstand external economic or market downturns and long periods of revenue losses or low profit margins, which can result in a negative net worth despite the airline’s operating performance being strong,” an official was quoted as telling the newspaper.

The government is planning to execute the disinvestment process of the troubled Air India group in phases, and separate expressions of interest (EoIs) will be issued for each entity under the corporation.

EoIs are likely to be issued by the end of the month. The government will kick-off the exercise with the sale of the parent airline and Air India Charters, which operates low-cost flights under the Air India Express brand.

In June 2017, the Cabinet Committee on Economic Affairs (CCEA) gave its in-principle approval for the strategic divestment of Air India, which has a debt burden of over Rs 50,000 crore. The government expects to complete the privatisation of Air India this year and is planning to retain a 24 percent stake in the ailing carrier.

It aims to split the airline into four different entities and hopes to sell each entity.

With inputs from agencies

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