Cabinet clears Air India disinvestment

Cabinet clears Air India disinvestment

The Union Cabinet on Wednesday gave an "in principle" go ahead for the strategic disinvestment of debt-ridden national carrier Air India after tasking a Group of Ministers to work out its modalities.


 The decision was taken at a meeting chaired by Prime Minister Narendra Modi after considering the proposals of Niti Ayog to completely privatise the national carrier and the Ministry of Civil Aviation (MoCA) plan to have a substantial reduction of stakes.

 "We have given an in principle approval for disinvestment of Air India. A group will be set up to finalise modalities/details of disinvestment of Air India, including the quantum of stake sale," Finance Minister Arun Jaitley told reporters after the Cabinet meeting.

 While Jaitley will head the group of ministers, Civil Aviation Minister Ashok Gajapathi Raju and some ministers chosen by Modi would be members.

 In a 30-page note prepared by Department of Investment and Public Asset Management (DIPAM), the options suggested by Niti Ayog and MoCA were considered and put up before the Cabinet. Sources said both the proposals were discussed but the government decided to go ahead with the MoCA proposal.

 The decision comes against the backdrop of arguments that there is no point in government pumping in money into Air India as part of its Turn Around Plan and Financial Restructuring Plan (TAP-FRP). Under the TAP-FRP approved in April 2012, the government had committed to infuse equity of Rs 42,182 crore from 2011-12 to 2031-32.

 The airline also has a debt of more than Rs 52,000 crore and is surviving on the bailout package extended by the previous UPA government. Earlier in 2000, the then A B Vajpayee government had cleared the disinvestment of Air India but it could not go through following protests.

 According to an official statement, this approval is for the fourth tranche recommendations of NITI Aayog on strategic disinvestment of central public sector enterprises.

 The Group of Ministers would guide the process on strategic disinvestment from time to time and decide on the "treatment of unsustainable debt of Air India, hiving off of certain assets to a shell company, de-merger and strategic disinvestment of three profit-making subsidiaries, quantum of disinvestment and the universe of bidders".

 Last week, there was speculation that Tata Group has evinced interest in buying majority stakes in Air India following government's proposed plans to reduce its shares in the national carrier.

 Earlier, Jaitley had said in a panel discussion on Doordarshan that the proposed disinvestment of Air India was first cleared when he was in the Vajpayee Ministry. "Today, they have a market share of 14% and a debt of Rs 50,000 crore.

Your money does not go into private sector airlines such as Indigo, SpiceJet, GoAir, Jet Airways. then why should you put Rs 50,000 crore in running Air India? Government money means your money. This money can be used for education," he had said.

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