Parliamentary panel raises questions about Modi government's disinvestment strategy

Is disinvestment of profitable public sector enterprises justifiable or not – a Parliamentary panel has raised questions about the Narendra Modi government's disinvestment strategy.

The query came in a report tabled in Parliament on Monday after the Parliamentary Standing Committee examined the sale of Air India to Tata Sons in which the government "received only a cash component of Rs 2,700 crore" besides the buyer taking over a debt of Rs 15,300 crore.

While Air India was handed over to the Tatas, the government had set up Air India Assets Holding Limited (AIAHL), a Special Purpose Vehicle to disinvest four subsidiaries of the erstwhile national carrier and monetise other assets.

Also Read: 'Fake shortage of seats': Parliamentary panel flags ‘dark patterns’ of airlines

On 8 October, 2021, the government announced that M/s Talace Pvt Ltd, launched by the Tatas, as the winning bidder of the national carrier. It took over Air India on January 27 next year.

In its report on the Demands for Grants of the Ministry of Civil Aviation, the Parliamentary Standing Committee on Transport, Tourism and Culture noted that the government had provided a financial assistance of Rs 64,026.40 crore in the form of equity to AIAHL.

"However, subsequent to the disinvestment, the Government received only a cash component of Rs 2,700 crores and also retained a debt of Rs 15,300 crore," the report said while asking the Ministry to provide the "details of the actual revenue" the government has generated by disinvesting a "massive company like the Air India.

Highlighting that the financial assistance to AIAHL was "nothing but public money", the panel also asked the committee to provide details of the Enterprise Valuation method adopted for the disinvestment of Air India and the procedure followed to arrive at the valuation.

It then went on to ask the government to provide details of the four subsidiaries under AIAHL -- Alliance Air Aviation Ltd, AI Airport Services Ltd, AI Engineering Services and Hotel Corporation of India Ltd -- and due for disinvestment.

With AI Airport Services Ltd (Rs 843.9 crore) and AI Engineering Services (Rs 38.2 crore) reporting profit in 2021-22, the panel said it should be apprised about the disinvestment policy with respect to their financial performance. "Also, it may be clarified whether disinvestment of enterprises which are earning profits is justified or not," the panel emphasised.

In her budget presented on February 1 this year, Finance Minister Nirmala Sitharaman had scaled down the disinvestment target from Rs 65,000 crore to Rs 50,000 crore in 2022-23. For 2023-24, she has put a target of Rs 65,000 crore.