Complete Air India sale or Air India IPO? Govt panel to decide next week
A ministerial panel is set to meet next week to explore options regarding the future of Air India, after a government disinvestment attempt failed last month
New Delhi: A ministerial panel is set to meet next week to explore options regarding the future of Air India Ltd, after an attempt to sell part of the government’s stake in the airline faced a setback last month.
The options before the panel may range from getting Air India listed to full privatisation or even calling off the sale, said an official who spoke on condition of anonymity.
That decision is expected to be a political one as the government’s handling of the loss-making national carrier has the potential to become a thorny political issue in the last year of the National Democratic Alliance (NDA) government before national elections are held next year.
One of the options policymakers are examining is to let Air India tap the capital markets by getting listed, the official cited above said.
The profitability of the company will be a key criteria in getting listed. The Securities and Exchange Board of India’s norms mandate that a company that goes for initial public offering (IPO) has to have a reported a pre-tax operating profit in at least three of the immediately preceding five years.
Air India has been reporting net losses since fiscal year 2007-08, the year in which it had been amalgamated with another state-owned aviation company, Indian Airlines.
However, chairman Pradeep Singh Kharola said in Air India’s annual report for 2016-17 that for the second consecutive year, the airline had posted an operating profit—Rs 298 crore in 2016-17 and Rs 105 crore in the year before.
The company said this was possible as a result of improvements in capacity utilization. Figures for the last fiscal year, 2017-18, are not immediately available.
The ministerial panel, which includes finance minister Piyush Goyal and civil aviation minister Suresh Prabhu, will review the treatment of Air India’s debt, the manner and quantum of strategic disinvestment and universe of bidders and the terms that are binding on the investor after the transaction.
A second person involved in the strategic sale of Air India, who also spoke on condition of anonymity, said that the ministerial panel will approach the options with an open mind.
The government had in the last fiscal year reworked the ownership of state-owned Hindustan Petroleum Corp. Ltd (HPCL) by selling the stake it directly held in the oil marketing company to another state-owned company, Oil and Natural Gas Corp. Ltd (ONGC).
The sale of a 51.11% stake in HPCL fetched the exchequer Rs 36,915 crore.
Privatising Air India became the most obvious option as the national carrier has been on a taxpayer bailout since 2012.
A failure to sell the airline could result in the government’s having to infuse more capital to keep the company going.
At the same time, the government does not want to be seen selling the iconic airline on very easy terms to private investors, which could also include foreign firms.