Foreign Airlines Stake In A-I Proposed

The civil aviation ministry has recommended that foreign airlines be allowed to pick up 25 per cent of the government stake in Air-India as a strategic partner.

The government's shareholding in the national carrier is proposed to pruned to 49 per cent.

Also, the ministry, in a note for the Cabinet Committee on Disinvestment (CCD) meeting next week, has proposed that Rs 1,000 crore be pumped into the airline through equity.

Earlier, the A-I divestment issue was taken up by the core group of secretaries, which pointed out that it would not be possible to provide Rs 1,000 crore to A-I due to the government's financial constraints.

 

But the core group stressed the importance of roping in a strategic partner (which can also be a foreign airline) with management control.

Sources told Business Standard that the ministry wants the government to give a guarantee to the strategic partner that A-I would not be nationalised again without an adequate compensation package.

To further strengthen the A-I kitty, the ministry has also suggested that the government invest the selloff proceeds from Hotel Corporation of India, a 100 per cent subsidiary, in Air-India.

For A-I divestment, the note suggested appointing a global advisor to prepare a detailed scheme. And only after examining its recommendations, the proposal would be finally placed before the cabinet committee.

Earlier, the Disinvestment Commission also recommended in its eighth report on A-I divestment that the government provide Rs 1,000 crore as equity and rope in a strategic partner and then issue fresh shares worth Rs 770 crore.

The report said the step would enhance the paid-up capital of A-I to Rs 1,924 crore and initially reduce the government stake to 60 per cent, to be further pruned to 40 per cent.

After offering another 40 per cent to the strategic partner, the rest can be offered to domestic institutional investors, employees and the public.

The Divestment Commission had also recommended offloading government equity in HCI, as its fundamentals are under pressure.

The commission separately prepared a note for CCD, suggesting that the revenue from HCI selloff be transferred to A-I.

The civil aviation ministry, in its note for the Cabinet committee, raised related issues also like the national carrier's debt burden, the need for financial restructuring and induction of additional equity, rationalisation of employees' remuneration and the voluntary retirement schemes.

The civil aviation ministry's earlier proposal of bringing down the government equity in Air-India to 40 per cent was supported by the department of public enterprises and the department of economic affairs.

For Smooth Takeoff

The Civil aviation ministry wants the gov to....

* Inject Rs 1,000 crore in A-I through equity

* Provide a gurantee to the stategic partner that A-I will not be nationalised against without an adequate and mutually-agreed compensation package

* Divest in Hotel Corporation of India and pump the proceeds into A-I

* Take a final view on debt, financial restructuring, rationalisation of remuneration, VRS, fleet upgradation, etc.