Finance Minister Nirmala Sitharaman and Civil Aviation Minister Hardeep Singh Puri, along with senior bureaucrats, met on Wednesday, ahead of the meeting of the group of ministers (GoM) on the proposed privatisation of Air India on Thursday.
“This is the preliminary meeting. There is a meeting of the alternate mechanism scheduled tomorrow. All I can say is as we progress, you will be kept informed,” Puri told reporters in the Finance Ministry.
Puri added that the meeting of the Air India Specific Alternative Mechanism (AISAM) will discuss the airline’s debt position and issuance of the expression of interest, which will formally kick of the government’s second attempt to sell the beleaguered national carrier.
The AISAM, headed by Home Minister Amit Shah, is supposed to meet on Thursday for the first time. The meeting is likely to discuss what portion of the beleaguered national carrier’s debt will be part of the sale.
Officials from finance and civil aviation ministries have been discussing this key issue for a while now. This will decide how much lower the divestment proceeds will be compared to the size of the deal.
“We are in the process of finalising how we make the terms slightly better, to make it more attractive. The discussions are on what portion of debt will be part of the deal. We will not separate the entire debt. If some debt is passed on, one will have to examine what part of the deal is equity and what is debt,” said a senior official, who did not want to be named.
They confirmed the size of the deal and the divestment proceeds from it will not be the same.
As a hypothetical example, if government sells Air India for Rs 20,000 crore, and the size of debt passed onto the buyer is Rs 15,000 crore, then the divestment proceeds will only be Rs 15,000 crore.
Apart from Sitharaman and Puri, the meeting on Wednesday was attended by Economic Affairs Secretary Atanu Chakraborty, Department of Investment and Public Asset Management Secretary Anil Kumar Khachi, Aviation Secretary Pradeep Singh Kharola, Air India Chairman and Managing Director Ashwani Lohani and Air India finance director Vinod Hejamadi.
Sources said the finance ministry is unlikely to infuse any extra cash into Air India despite repeated requests by the carrier and the civil aviation ministry.
The 2019-20 Union Budget allocated about Rs 2,600 crore for Air India Asset Holding (AIAHL), the special purpose vehicle created to warehouse the carrier’s debt. Nothing more is expected to be allocated in any of the supplementary demand for grants.
That money will be used to pay interest on the bonds issued by AIAHL. It has already raised about Rs 7,000 crore through its maiden bond issue and is expected to float a fresh set of bonds in the next few days, looking to raise around Rs 15,000 crore.