(Agencies) New Delhi : Niti Aayog, the government’s think tank, has recommended strategic disinvestment of loss-making Air India, so that the Centre does not have to sink in more money into the airline and can allocate more funds for health and education.
The report completes the groundwork for the Centre to initiate the sale of the airline and comes in the wake of finance minister Arun Jaitley’s support for stake sale in the bleeding carrier. Sources told media that a decision on the future course of action would be taken by the cabinet.
Niti Aayog’s fourth report, which was submitted recently, has detailed a possible roadmap for Air India disinvestment+ , which includes writing off loans to the tune of Rs 30,000 crore+ . AI has debt of around Rs 60,000 crore, which includes around Rs 21,000 crore of aircraft-related loans and around Rs 8,000 crore working capital, said aviation sources.The proposal is to transfer the aircraft-related loans and the working capital to the new owner, while taking care of half the liability.
Similarly, Niti Aayog has suggested that the real estate assets, which includes prime properties in Mumbai’s Nariman Point and some places in Delhi like Vasant Vihar, be hived off into a separate company before offering up to 100% equity to a strategic partner.
The buyer will also get several other rights that Air India currently enjoys, with officials suggesting that there is no need to have a designated national carrier. Several countries have exited the airline business as it is not a core sovereign function.
Since Air India will be sold as a going concern, employees will move to the privatised entity.
The airline has accumulated losses of about Rs 40,000 crore and has projected a cash deficit of Rs 3,000 crore for the current financial year with a gap narrowing to around Rs 1,700 crore annually in the coming years. Although Air India reported operating profit of Rs 105 crore in 2015-16, it is not seen to sustainable given that the annual interest burden is estimated at around Rs 4,000 crore.
The government has already sunk Rs 25,000 crore into the airline over the last five years and is required to provide a similar amount in the coming few years.
“The Aayog’s recommendation is very clear: find a strategic investor for AI. Now that is a call for the owner (government of India) to take. Some initial clarity on the future course may come in the next 15 days or so,” said a source.
Aviation minister A Gajapathi Raju and his deputy Jayant Sinha confirmed that Niti Aayog had submitted its report, but did not disclose the details. “We are very proud of AI and will consider all possible alternatives for it. All options are open. Niti Aayog has suggested steps for a strong and viable airline,” said Raju at a press conference to mark three years of the Modi government.
Foreign airlines are allowed to have up to 49% stake in Indian JV carriers — as Singapore Airlines and AirAsia do with Tata Group in Vistara and AirAsia India, respectively, while Etihad has a 24% stake in Jet. Asked if foreign airlines would be allowed to pick up a stake in AI, the ministers said the government is “open to all options”. Qatar Airways has recently stated it wants to have an airline in India but is yet to make an application for a startup carrier here.AI is supposed to get Rs 25,000 crore more from the government over the next 15 years. “It is not correct to see us as a domestic airline alone with 14% market share. We are essentially an international airlines with a very robust foreign network. Our share of international travel to and from India last year was close to 17%. AI has a critical network and it should not be seen as a burden. We are a victim of wrong decisions by previous governments. Luckily, there is a clean administration determining our future now,” said an AI insider, reflecting the widespread mood in the airline.
A ministry source said Niti Aayog’s recommendations are not binding on it and it will choose the path that is most suited for having a strong AI in future. “We hugely respect finance minister Jaitley’s views. What we can assure everyone is that there will be visible action in AI very soon as Niti Aayog’s recommendations and the FM’s statement have been made in all seriousness that will lead to the future path for the airline being laid out in three months,” said the official.