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Will government's fresh plans to divest stake in Air India work out?

The budgetary allocation for Air India's TAP in 2019/20 is far lower than the allocations in the previous years.

twitter-logo Manu Kaushik        Last Updated: February 4, 2019  | 19:22 IST
Will government's fresh plans to divest stake in Air India work out?

It seems that the government is again firming up plans to disinvest stake in national carrier Air India. According to the interim Budget 2019/20 documents, the government has earmarked an expenditure of Rs 1 lakh for Air India's turnaround plan (TAP), a 10-year plan, which was approved in 2012. The Congress-led UPA government had approved Rs 30,231 crore for Air India, and as per minister of state for civil aviation Jayant Sinha, the AI has received an equity infusion of Rs 27,195.21 crore out of that amount till last August.

The budgetary allocation for Air India's TAP in 2019/20 is far lower than the allocations in the previous years. For instance, the government budgeted Rs 650 crore for Air India in 2018/19 but revised the estimates to Rs 3,975 crore. A year before that, the government had spent Rs 1,800 crore. A mere Rs 1 lakh allocation for Air India's TAP highlights the realisation within the government to avoid making more revival attempts.

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Some recent reports suggest that the government is looking for the strategic sale of Air India by the middle of this year and will be floating an expression of interest (EOI) document in some time. But because of the impending elections, there's a great degree of uncertainty around such plan.

The government had last year offered to sell 76 per cent in Air India. The offer also included 100 per cent stake sale in low-cost subsidiary Air India Express and a 50 per cent stake in ground handling agency Air India SATS. Some terms of the offer, including taking over Rs 32,000 crore of debt and liabilities and clause of retaining its strong 38,000-workforce for a year, turned out to be a deterrent to attract any potential suitors.

The debt-ridden national carrier has been posting net losses for several years in a row. Several turnaround plans by successive heads of the ailing airline have fallen flat on their faces.

But not allotting money for Air India in the budget doesn't mean that the government has stopped looking at other avenues to support Air India. For instance, the government has earmarked some Rs 3,900 crore (Rs 2,600 crore in 2019/20 and Rs 1,300 crore in 2018/19) for Air India Asset Holding Limited (AIAHL), a special purpose vehicle (SPV) that has been set up to transfer a part of the airline's debt. A large part of this allocation is likely to go towards interest payments.

Air India has an estimated debt of Rs 55,000 crore, out of which, Rs 29,000 crore is expected to be transferred to AIAHL, which, in turn, will repay debt and clear liabilities from the sale of Air India's assets sale. Allocating Rs 3,900 crore for AIAHL, experts say, would mean that the government is not expecting significant proceeds from sale of Air India's assets and subsidiaries.

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