Row Over A-I Divestment Level

The union civil aviation ministry has locked horns with the minister of finance and disinvestment of government equity in Air-India.

While the civil aviation ministry favour sdilution of 25 per cent, the finance and disinvestment ministers are pressing for a 40 per cent divestment in favour of a strategic investor to get an attractive price.

According to sources in civil aviation ministry, the decision on the matter has now been forwarded to the Prime Minister's Office (PMO).

A final decision in this matter is expected to two weeks from the PMO, they added. The final proposal will be decided at the Cabinet Committee on Divestment (CCD) after it is cleared by the PMO's office.

 

The ministry of civil aviation has argued that any increase in the extent of divestment of the government's equity to levels beyond 26 per cent will enable the strategic partner to block resolutions, as per the Companies Act.

If feels that majority control of the national carrier should be rest with the government and the strategic partner be offered only upto 25 per cent. however, souces said the ministry is not averse to offering contaol of the day-to-day opeations of the airline to the strategic partner.

The ministry attempted to strengthen its oposition by saying that even the US and UK foreign airlines are not allowed majority control.

However, the ministries of finance divestment have stuck to their stand of ceding up to 40 per cent to the strategic partner. The have citied the example of Emirates Airlines acquiring a 40 per cent stake in the Sri Lankan national carried Air Lanka.

Top Air India sources said: "Ideally the airlines should offload a minimum of 26 per cent equity so that the foreign partner can have a say on the critical decisions taken by the board."