Civil Aviation Minister Hardeep Puri said on Saturday (March 27) that Air India will be “100% disinvested” or “closed down”, leaving no room for doubt about the Centre’s intentions on the future of the national carrier.
“It (Air India) must find a new home. The choice isn’t between disinvestment and non-disinvestment. It’s between disinvestment and closing down. Air India is a first-rate asset, but has an accumulated debt of Rs 60,000 crore. We need to draw the slate clean,” Puri told news agency ANI.
Three investors — Tata Sons, Spice Jet and a consortium of Air India employees — bid for the government’s stake in the airline in February. The government left out the Air India employees’ consortium from the bidding, thus leaving only two players – Tata Sons and Spice Jet – in the fray.
Speaking at the Times Network India Economic Conclave on Friday (March 26), Puri said that financial bids for Air India will be submitted sometime in May. “The shortlisted bidders be informed that the bids have to come in within 64 days…This time the government is determined and there is no hesitation,” the Union Minister said.
During her Budget speech, Finance Minister Nirmala Sitharaman too had hinted that the disinvestment process of Air India will be completed in 2021-22.
It is important to divest Air India because the Centre has set an ambitious target of Rs 1.2 lakh crore to be raised via disinvestment in this financial year.
The government’s first effort to disinvest Air India in 2018 had come to a naught. The Ministry of Civil Aviation had floated the Expression of Interest (EoI) with a clear objective to offload a 76 percent of its 100% percent stake in Air India. However, not a single bid was received, primarily because of the extraordinary debt the national carrier has over it.
The Centre invited groups and companies to submit expression of interest (EoI) once again last year. In view of the coronavirus pandemic, the last date for submission of EOIs was extended up to December 14, 2020.
Besides selling its 100 per cent stake in Air India and Air India Express, the government is also looking to offload its 50 per cent share in Air India Airport Services.
Currently, Air India has 121 operational aircraft, of which 65 are owned, while its subsidiary Air India Express has 25 Boeing 737, of which 10 are owned.
As per one estimate, Air India may suffer a loss of about Rs 10,000 crore in this financial year. On the brighter side, the national carrier’s debt came down to Rs 23,000 crore as the Centre shifted its Rs 30,000 crore working capital debt to a special purpose vehicle — AI Asset Holdings Ltd.
Air India’s ever-rising debt is a big concern for the government, which aims to write off the debt before a private player takes it over so that the airline has an opportunity to generate profits for its new owners. By doing so, the government wants to encourage good bidding process and not fall flat, like it happened in 2018 when it found no bidder at all.