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Air India privatisation: Bumps on the runway that are slowing sale take-off

Among the key issues holding Expression of Interest (EoI), first stage of bidding, is whether FDI norms have to be relaxed to allow foreign airlines to take full control

Air India
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The government has decided to ease terms of sale for Air India but it is still facing tough choice on almost half a dozen issues that could be crucial for the airline's successful disinvestment.

Among the key issues holding Expression of Interest (EoI), first stage of bidding, is whether FDI norms have to be relaxed to allow foreign airlines to take full control of the airline and extending national carrier status after change in ownership.

While raising FDI limit in domestic airlines beyond 49 per cent for foreign carriers would enthuse carriers like Qatar Airways and Singapore Airlines to participate in the bidding, national carrier status would give right of first refusal to the new owner in seat allocation on international routes.

The other issues include transfer of additional debt to the special purpose vehicle (SPV) and use of brand name Air India in future.

As much as Rs 10,000 crore of additional debt, over and above Rs 29,464 crore decided earlier, is proposed to be moved to Air India Assets Holdings Ltd (AIAHL), the special purpose vehicle of Air India for transferring part of its debt and assets.

"Even after transfer of Rs 29,464 crore of debt to SPV, the same amount of debt would still be there. It has to be decided by the group of secretaries and then the ministerial panel as to how much more debt has to be taken out to ensure sale process happens," an official said.

"The amount of debt will be related to the assets that would be on the airline books," he added.

A core group of secretaries met on Thursday to consider pending issues and resolve them so that the bidding process for Air India could begin by November-end. This will be the second attempt of the Modi government to sell Air India. In the first attempt last year, it had failed to attract a single buyer forcing it to abandon the sale process.

Among many issues, private investors were concerned about government retaining 24 per cent stake in the airline. The government has hence decided this time to almost completely exit Air India.

"The government has to also see this time how many employees would the new buyer be comfortable in taking. There are some other issues too and based on how early they are resolved the EoI would be invited," the official said.