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Let state airlines buy planes: Panel

Amrita Dhar in New Delhi | December 08, 2003 10:42 IST

The Naresh Chandra Committee, set up to evolve a roadmap for the civil aviation sector, is slated to present its report to the government soon.

The high-powered panel is likely to recommend that Indian Airlines and Air-India be allowed to acquire fleet, independent of the government's plan to privatise them.

The recommendation will be in variance to the finance ministry's opinion that no fresh investments should be made by the airlines before their privatisation.

The two airlines had been removed from the divestment list after the finance ministry's objection that such large investments could not be made in companies that were to be divested.

Sources close to the committee said it was of the view that fleet replenishment was a pre-requisite for the airlines to improve performance and attract prospective buyers.

"With the aviation industry looking up, the divestment process for the two airlines should be initiated," sources said. The committee is of the opinion that both the airline management and the civil aviation ministry should work at improving the airlines, in terms of image and product.

Both IA and A-I have sent proposals for fleet acquisition worth Rs 20,000 crore (Rs 200 billion).

While IA has asked for 43 aircraft, A-I has sought 28.

The committee is likely to suggest that the divestment process be initiated first in IA since the airline is in a better shape in terms of management and product quality. The committee is also likely to recommend 49 per cent foreign direct investment in domestic carriers and allowing foreign airlines pick stake in them.

The committee, however, is not likely to suggest a mode for the divestment for IA as the Kelkar committee had done in 1995.

The committee had suggested that 49 per cent of IA's shares be held by nationalised banks and FIIs, 10.6 per cent should be with the employees and the rest with the public.

The sources said the committee was likely to oppose the merger of the two national carriers. It was of the opinion that it would be disastrous to merge the two, they added.

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