Air India—one of the most famous air carriers in India was struggling with a debt of more than Rs 52,000 crores for many years. Surviving on a bailout package of Rs 30,000 crores issued by the former UPA government, the company has to pay an additional amount of Rs 4,500 crores as the annual interest. Air India received help worth Rs 24,000 crores from the government so far, which wasn’t enough to cover its losses. Seeing no way out of this financial mess, the union cabinet gave a green signal for privatization of Air India as well as five subsidiaries.
On June 22, Mr. Arvind Panagriya, an adept economist and the vice chairperson of Niti Aayog said that the debt of Air India was ‘unsustainable’. The company has done everything in its power to resolve the situation. He further hinted that the government is likely to privatize the air carriers soon. Affirming his statement, the ministry has made the formal announcement now.
This move is likely to rid the company of its debts. To top it, it’ll help the operators boost their services. The decision was collectively made by the cabinet ministers on Wednesday, in response to a proposal presented by the Union Civil Aviation Ministry. The panel is yet to decide the terms and conditions for the privatization of Air India. If finance minister Arun Jaitley is to be believed, the ministers will decide the ‘terms’ and formalities for disinvestment. They’ll also make a decision regarding its outstanding debts, assets, companies, and hotels working in association with the company.
The Department of Investment and Public Asset Management had recommended three options for stake sale—51%, 74%, and 100%. Nevertheless, the cabinet will have the final word in this regard. The panel in charge will decide whether they wish to opt for 100% stake sale in one go or if they would like to divest in time.
Ministry Jaitley led “AI-Specific Alternative Mechanism” will invite potential investors for the bidding process. For those who don’t know, as per the aviation rules of India, even foreigners can own Indian airlines in India. However, their ownership is capped within the 49% mark. As of now, the Tata Group is the favorite choice among all bidders.
The experts believe that the future of air connectivity is likely to grow in private hands.
