Cabinet gives an in-principle approval to disinvestment of Air India, its five subsidiaries

Intense speculation on the fate of the beleaguered national carrier has come to a grinding halt with the government approving an in-principle systematic disinvestment of Air India and its five subsidiaries. Finance Minister Arun Jaitly announced the government’s decision, informing that he would be heading a GoM panel to chalk out the modalities of the move.

aiBiting the bullet, the government has finally given an in-principle approval to a systematic disinvestment of Air India and five of its subsidiaries. The move comes at a time when the national carrier has been news for its long-pending legacy issues, saddled with an outstanding debt mounting to a staggering 52,000 crores, and an annual debt interest of over 450 crores. The airline had received a bailout package of 24,000 crores in 2012 – funds were released in a phase-wise manner – which kept the airline afloat.

Sharing the news, Arun Jaitly, Union Minister of Finance and Defence informed a media gathering recently that he would be heading a panel of ministers to look into the modalities of the disinvestment. It remains unclear yet whether the airline would be privatised or simply disinvested.

According to media reports, the government adopted the suggestion put forth in a 30-page note prepared by the Department of Investment and Public Asset Management (DIPAM) after discussions in a Committee of Secretaries, headed by the Cabinet Secretary. Given the two options– NITI Aayog’s suggestion of complete privatization of the struggling national carrier and Civil Aviation Ministry’s proposal of a major reduction in the airline’s debt by sale of subsidiaries and assets before privatisation – the government chose the latter.

Earlier, CAPA, an aviation think-tank, had backed the disinvestment bid in a recently released report, noting that it was going to have “far-reaching implications for reforms in the aviation sector in the country.” In another related development, several TV channels have reported that the TATA group has shown interest in acquiring a stake in the airline. Low-cost carrier, IndiGo, too, has offered to buy stake and reportedly already approached the government with an offer, as per several reports.

While it would be difficult to assess the challenges ahead in materializing the disinvestment, the move has signalled government’s intent of going strong on the reform front which augurs well for the health of the aviation industry.

Everything said, we believe that the essence of a national carrier must remain. TourismFirst also, believes that the country needs a national flag carrier, irrespective of the airline and Air India must remain Indian and as the national air carrier, reflect the ethos of India.  

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