Govt retaining Air India is an option with civil aviation ministry

Ministry had opposed the suggestion of privatisation, says senior civil aviation ministry officials

The Union Cabinet, led by Prime Minister Narendra Modi, is weeks away from deciding the matter of privatising Air India.
 
However, even in these advanced stages of discussions, the civil aviation ministry is said to be considering the option of the government retaining ownership of the national carrier, and running it after retiring its debt of Rs 46,570 crore.
 
A senior finance ministry official said on Tuesday during inter-ministerial deliberations on the draft Cabinet note on privatising Air India that the civil aviation ministry had raised some reservations. It is still in favour of reviving the debt-laden national carrier, the official said.
 
“They (civil aviation ministry) have raised some reservations on privatising Air India,” said the official, and added that the matter was being deliberated upon. “They are in favour of continuing operating the national carrier by retaining a majority stake,” the official said.
 
However, senior civil aviation ministry officials denied that the ministry had opposed the suggestion of privatisation. Retaining ownership was one of the options that it had suggested. “As part of inter-ministerial discussion, the civil aviation ministry has given its suggestion of either reviving the airline, going for privatisation, or reducing the airline’s debt by selling off the assets,” a senior civil aviation ministry official said.
 
The final call will be taken by the Cabinet Committee of Economic Affairs (CCEA). “We have left it to them,” the official said.
 
When asked about the aviation ministry’s opposition, Minister of State for Aviation Jayant Sinha did not comment on the specifics but reiterated that the Cabinet would have the final say.
 
A second civil aviation ministry official privy to the matter said that the civil aviation ministry had suggested that the first mode of restructuring the debt would be to ask the banks to recast it into equity. “Banks will be asked to reconsider the option of debt-equity conversion, this will entail banks getting a representation in the airline’s board,” said the official.
 
The finance ministry official quoted above also said that the government would consider taking over part of the airline’s debt of Rs 46,570 crore. If that plan fails, the other option is to sell the company’s assets and the subsidiaries — Air India Engineering Services Ltd (AIESL), Air India Transport Services Ltd, and Hotel Corporation of India (owner of Centaur Hotels).
 
“The subsidiaries are profit-making with good facilities and will demand good price,” said the second civil aviation ministry official. Back-of-the-hand calculations suggest these, together with the prime real estate properties, could entail a price of more than Rs 35,000 crore.
 
“The valuation will be done through a professional,” he said.
 
“The bigger question is whether India needs a state-owned carrier, and, if it does, whether the government can continue with the same structure or start a new company. These are just ideas being debated,” the finance ministry official said.