Centre to go ahead with Air India disinvestment; Ministry of Civil Aviation says support from govt has led to improved performance

New Delhi:  The government said on Thursday efforts to sell debt-laden state-run carrier Air India were still on track, hours after a junior minister told Parliament the privatisation was on hold because of high oil prices and volatile exchange rates.

The government failed last year in its attempt to sell a 76 percent stake in loss-making Air India due to a lack of interest from bidders but said it would return with an alternative proposal soon.

“Continued support from the government (has) resulted in improvement of (the) financial & operational performance of Air India... the government will now go ahead with the process of disinvestment of the company,” the Ministry of Civil Aviation said on Thursday.

It issued the statement to correct comments earlier in the day by the country’s junior civil aviation minister, who told Parliament conditions were still not right to attempt another sale, Reuters said.

“The present environment is not conducive to stimulate interest amongst investors for strategic disinvestment of Air India in the immediate near future,” Hardeep Singh Puri said, adding that the government would revisit the sale once global economic conditions become more favourable.

A spokesman for the Ministry of Civil Aviation said the confusion stemmed from Puri referring to a report from last year and stressed the sale plan was still on.

"In an AISAM (Air India Specific Alternative Mechanism) meeting held on 28 March 2018, it was decided that due to issues like volatile crude oil prices and adverse fluctuations in exchange rates, the atmosphere was not conducive for the disinvestment. But this was last year," the ministry said in a statement.

The AISAM, which is basically a Group of Ministers (GoM), has to be reconstituted as Arun Jaitley and Suresh Prabhu are no longer ministers in the second innings of the Narendra Modi government.

 Centre to go ahead with Air India disinvestment; Ministry of Civil Aviation says support from govt has led to improved performance

File image. Wikimedia Commons

They will be replaced by Finance Minister Nirmala Sitharaman and Civil Aviation Minister Hardeep Singh Puri. Transport Minister Nitin Gadkari is likely to continue in the panel.

At a meeting on 28 June 2017, the Cabinet Committee on Economic Affairs (CCEA) had in-principle approved the consideration for strategic disinvestment of Air India and its five subsidiaries. The AISAM was constituted by the CCEA for this purpose, a PTI report said.

The country's aviation sector is facing turmoil with one of the biggest private carriers, Jet Airways, facing bankruptcy, while passenger growth in the market overall has slowed.

Potential bidders for Air India last year suggested they found some of the stake sale terms too onerous, making it a non-starter. The government said high oil prices, a weaker rupee and rising interest rates hurt the sale’s prospects.

Prime Minister Narendra Modi’s government has since hived off a part of the airline’s debt, about 300 billion rupees, into a separate entity and is trying to sell off some of its assets and subsidiaries, such as the ground-handling unit, piecemeal.

“The government has prepared a revival plan for Air India which includes a comprehensive financial package,” Puri said, adding it would focus on increasing revenue and reducing costs.

Air India is expected to report a loss of more than 76 billion rupees for the year that ended in March 2019, Puri told Parliament.

Updated Date: Jun 28, 2019 09:59:14 IST