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Govt sets October deadline for sale of Air India

July 08, 2019 17:40 IST

Sources in the know said the government would initiate talks with businesses, including Tatas, shortly for divesting its stake in the national carrier.

The build-up to Air India privatisation has taken off in full swing with the Union Budget announcing it as the centrepiece of divestment this year.

The government is targeting October as the deadline for announcing the deal.


Not leaving anything to chance after a failed attempt earlier, the government has shortlisted the potential bidders, with the Tata group on top for its interest in aviation.

Sources in the know said the government would initiate talks with businesses, including Tatas, shortly for divesting its stake in the national carrier.

The proposed dialogue with potential buyers will coincide with the government procedure of issuing bid documents for expression of interest sometime this month.

“Now that the finance minister has committed in the Budget, we will start approaching prospective bidders,” said a source close to the development.

While pointing out that the Tatas will be approached first, he said, “They have a history with aviation and they know how to run an airline.”

“In view of the current macroeconomic parameters, the government would not only reinitiate the process of strategic disinvestment of Air India, but would offer more central public sector enterprises for strategic participation by the private sector,” Finance Minister Nirmala Sitharaman had said in her Budget speech on Friday.

The government will soon reconstitute the Air India Specific Alternative Mechanism (AISAM), following which a new bid document will be issued.

The AISAM is charged with giving approvals at every step of the Air India divestment process, with only the blanket approval given by the Union Cabinet.

In Prime Minister Narendra Modi’s first term, the AISAM comprised then Finance Minister Arun Jaitley, Road Transport Minister Nitin Gadkari, Commerce and Civil Aviation Minister Suresh Prabhu, and Rail Minister Piyush Goyal. With Jaitley and Prabhu no longer a part of Modi’s Cabinet, the AISAM will be reconstituted to include Sitharaman and Civil Aviation Minister Hardeep Singh Puri. Jaitley has headed the AISAM since its formation in July 2017.

The Centre is planning to liberalise the terms and conditions for the sale of the national carrier.

The changes would allow a potential buyer to go for a stake sale of the airline immediately after acquiring it.

The revised norms would also enable merger or reverse merger of Air India with any existing business of the buyer.

At least 95 per cent stake of Air India will be up for sale, while retaining 5 per cent for the employee stock option.

This is the first time the government will relax rules for strategic disinvestment, meant to prevent asset stripping.

The relaxation of the rules was proposed by transaction advisor EY as multiple entities during the last sale process in 2017 had objected, saying it restricted the bidder from raising capital from the market and developing synergy with existing business.

The Centre is still pursuing the option of selling the airline’s subsidiaries before the airline itself, in order to deal with the outstanding debt of around Rs 27,000 crore.

At the previous auction, which failed to get any bidder, the government had decided to retain 24 per cent in the airline.

That was believed to be one of the primary reasons for not generating any interest from buyers.

Photograph: Reuters

Arup Roychoudhury in New Delhi
Source: source image