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Monday, 19 June, 2017, 14 : 00 PM [IST]

Cabinet may clear disinvestment of Air India this week

As per an ET report by Mihir Mishra, the Union Cabinet may clear the decks for the government’s stake sale in loss-making national carrier Air India this week after choosing between the option of an outright sale and partial divestment.

The Cabinet note prepared by the Committee of Secretaries includes both the NITI Aayog’s recommendation of complete privatisation and the Ministry of Civil Aviation’s (MoCA) proposal of a substantial reduction in the airline’s debt by sale of subsidiaries and assets before privatisation, a senior MoCA official said. “The proposal gives an option and leaves it to the cabinet to decide,” said the official, who didn’t want to be identified. It was expected to be cleared last week, but could not be taken up by the Cabinet, he said.

The move comes about two months after Prime Minister Narendra Modi gave the go-ahead for disinvestment in the airline, which has accumulated losses of more than INR 50,000 crore and has debt of about INR 55,000 crore.

The Committee of Secretaries, headed by the cabinet secretary, includes secretaries from the ministries of Aviation and Finance, Department of Investment and Public Asset Management and Department of Industrial Policy and Promotion.

The Prime Minister’s Office was also consulted during the preparation of the note to be sent to the Cabinet, officials said. The proposal by the NITI Aayog, the government’s think tank, is based on studies of revival of various international airlines in which governments exited fully. These include British Airways, Japan Airlines and Austrian Airlines. The proposal entails government taking a hit by waiving INR 22,000 crore in debt.

Under the MoCA proposal, officials said, a rough estimate suggests that at least INR 30,000 crore of working capital loans can be reduced through sale of subsidiaries and assets. About INR 33,000 crore of Air India’s debt is on account of working capital. Its annual interest outgo of INR 4,500 crore is about 21% of total turnover. The carrier is afloat thanks to a INR 30,231-crore nine-year bailout programme originally approved by the previous government in 2012.

The asset-sale decision was taken after the airline failed to show signs of a full revival during the three years of this government. (Source: ET)
 
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