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air india sale: Air India disinvestment: Why ‘Maharaja’ found no takers and what it means for government

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NEW DELHI: As widely expected, debt-laden state-owned carrier Air India failed to attract any bids for its sale. As the clock ticked past 5pm on Thursday – the deadline to submit bids, the civil aviation ministry tweeted the confirmation.

Despite putting out clarifications for as many as 160 questions from ‘interested bidders’, why didn’t anybody want to own the ‘Maharaja of the skies’? Here are some of the plausible reasons:

1) The government offered to sell 76 per cent of Air India. Having government, even as a minority (24%) shareholder, keeps a door open for interference

2) Of Air India’s total Rs 48,781 crore debt, bidders will have to take over debt of Rs 33,392 crore

3) 40 per cent of AI’s 27,000 employees are permanent staff which means a huge financial burden

4) Air India’s domestic market share has shrunk from nearly 20 per cent in 2010 to 13 per cent now

5) The flyer has accumulated losses of Rs 46,805 crore and most of its revenue goes in interest payments

6) The prime real estate that the carrier owns is not part of the deal

7) Political uncertainty due to general elections in less than a year’s time

How the flop show can hurt the government

In his budget speech, the Finance Minister Arun Jaitley ( Piyush Goyal is currently in charge of finance ministry till Jaitley recuperates from a kidney transplant), set the divestment target for the financial year 2018-19 at Rs 80,000 crore. The sale of Air India was supposed to be a major contributor towards achieving this goal. While the government had not set any minimum price, banking sources told news agency Reuters that the government hoped to fetch an amount between Rs 8,000 to Rs 10,000 crore from the sale.

Selling the state-run carrier had been seen as key to PM Modi’s plans to divest assets and help keep the fiscal deficit at 3.3 per cent of GDP, a goal already under pressure due to farm loans and other welfare benefits announced by the government ahead of the 2019 general election.

News agency Bloomberg termed the failure as a setback to PM Modi’s reformist image with the government now stuck with an enterprise that has survived on taxpayer money for the past decade.

(With agency inputs)

Updated: June 1, 2018 — 6:35 pm

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