Indian government is looking to sell Air India but may keep its debt
- The sale of the national carrier has always been a politically sensitive issue.
- Reports suggest that the government may sell the airline but transfer just a fourth of the company's debt.
- The proposal may give Narendra Modi's rivals ammunition to attack him for selling a national asset cheap.
According to an Economic Times report citing sources, the government is looking to reduce the amount of debt on the books to a fourth of its original amount before selling the airline.
When the government invited bids for Air India in 2018, the debt on the books was close to ₹59,000 crore. Of that, ₹29,400 crore was moved to a special purpose vehicle (SPV) that houses debt and assets of the national carrier.
This amount is being repaid through government-guaranteed bond issues in three batches.
Of the ₹30,000 crore remaining, about ₹15,000 crore is working capital debt, which the government may reportedly bear the burden. So, the potential buyer will only have the remaining ₹15,000 crore to shoulder-- just a fourth of the original amount.
Making Air India attractive
The idea is to make the debt-laden Air India, with all its operational inefficiencies, an attractive proposition for potential buyers. There was no response to the government's last call for bids. However, some of the factors have changed since last year.
On the upside, the disappearance of Jet Airways from the Indian skies has helped airlines charge more for tickets and make some money out of it. So much so that Air India is hoping to turn profitable this year, for the first time in over a decade.
On the downside, while India's aviation sector is expected to become the world's third largest aviation market by 2024, according to the International Air Transport Association, the passenger traffic has slowed down in recent months and that has dented performance for all airlines.
The government is also hamstrung by its own ideological parent, the Rashtriya Swayamsevak Sangh's insistence that the airline must not be sold to a foreign peer. That leaves very few interested parties who may be interested or can afford to spend on buying an airline.
While on the balance, the government will weigh out all its options, Prime Minister Narendra Modi's political rivals are unlikely to miss any opportunity possible to corner the government finding faults in the sale of Air India, a national asset that has evoked strong emotions in the past.
Emirates is not interested in Air India but is excited about its code share with SpiceJet
- Rural India likely to bounce back faster than urban: Kantar and GroupM report
- As Radio Mirchi rebrands to Mirchi, Prashant Panday walks us through the brand's transformation
- From a school dropout to building a spice empire and winning a Padma Bhushan, here’s MDH Masala’s Dharampal Gulati’s inspiring journey
- Air India's employees are looking for a private investor to back their bid for the national airline
- India reportedly invites UK Prime Minister Boris Johnson to be the chief guest for Republic Day