Cabinet nod for divestment of Air India and its 5 subsidiaries

29 Jun 2017


The Cabinet Committee on Economic Affairs (CCEA) has given 'in principle' approval for considering strategic disinvestment of Air India and five of its subsidiaries as recommended by NITI Aayog, the central planning advisor.

The union cabinet has accepted the civil aviation ministry's proposal to divest a stake in Air India, finance minister Arun Jaitley said, adding that a group of ministers will now look into the quantum, mechanism, debt and other issues of disinvestment.

''The CCEA, chaired by Prime Minister Narendra Modi on Wednesday approved the fourth tranche recommendations of NITI Aayog on strategic disinvestment of CPSE (strategic disinvestment of Air India and five of its subsidiaries) based on the recommendations of core group of secretaries on disinvestment (CGD),'' an official release said.

The CCEA also approved constitution of an Air India-specific alternative mechanism headed by minister of finance and including minister for civil aviation and such other minister(s) to guide the process on strategic disinvestment from time to time.

The ministerial group will consider among other things, the treatment of unsustainable debt of Air India; hiving off of certain assets to a shell company; demerger and strategic disinvestment of three profit-making subsidiaries; the quantum of disinvestment; and the universe of bidders.

''The Prime Minister will decide the composition of the group, only the chairman has been decided today,'' Jaitley said.

The recommendations of the group will have to be approved by the cabinet, he added.

Air India has a debt of Rs52,000 crore, including Rs20,000 crore in aircraft-related debt and Rs32,000 crore in working-capital loans.

The airline has a fleet of 105 aircraft. As of March 2017, its assets were worth about Rs40,000 crore.

Reports said the government is likely to take over half the working-capital debt as part of its divestment plan.

Reports have also speculated that Air India's privatisation would be done in one stroke. The one possibility is the government bringing down its ownership to below 49 per cent or exiting altogether. (See: Air India divestment to be at one go, not piecemeal)

Earlier reports had pointed to Tatas taking back control of the airline, which was originally founded by them. Air India traces its roots to Tata Airlines, which was formed way back in 1932. Set up by Tatas, the carrier was made a public company and was rechristened as Air India. Later, it was nationalised

In fact, sources said Tata group was evaluating options on buying stake in the airline.

Tatas had tried to acquire stake in Air India earlier as well.

Meanwhile, some reports said besides Tata some other airlines are also looking to acquire stake in the loss-hit national carrier.

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