Ministerial group looking into AI divestment meets

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SME Times News Bureau | 22 Jul, 2017
A ministerial group formed to look into the modalities of national passenger carrier Air India's divestment process met here on Friday.

The group -- Air India-specific Alternative Mechanism -- headed by Finance Minister Arun Jaitley met here for the first time after its formation. Apart from Jaitley, the meet was attended by Civil Aviation Minister Ashok Gajapathi Raju and some other ministers.

The group has been mandated to guide strategic divestment process and to decide on key issues such as treatment of AI's debt and hiving-off of its assets.

The demerger and strategic divestment of three profit making subsidiaries, the quantum of disinvestment and the universe of bidders is also on the group's agenda.

The meeting comes after the Union Cabinet's June 28 decision, giving in-principle approval for divestment of AI, whose debt has mounted to Rs 50,000 crore besides huge losses.

The decision was based on NITI Aayog's recent report to the Civil Aviation Ministry recommending strategic disinvestment in the loss-making national career.

The airline in 2015-16 had posted an operating profit of Rs 105 crore. For the last fiscal (2016-17), the company is expected to report an improved operating profit margin.

The flag carrier had got a new lease of life on April 12, 2012, when the then UPA government had approved a Rs 30,000 crore turnaround (TAP) and financial restructuring plans (FRP) package spanning up to the year 2021.

After the cabinet's in-principle approval for Air India's divestment, budget passenger airline IndiGo expressed its interest in participating in the stake sale.

On July 18, Air India Chairman and Managing Director Ashwani Lohani, in a letter to the airline employees, said the government's decision to consider AI's divestment stemmed from the fact that the airline is unable to service its "huge accumulated debt of over Rs 50,000 crore".

"This huge debt has accumulated due to continuous losses over the years. You would however appreciate that unless a solution is found to this huge debt, survival in the long run is almost impossible and the proposal to consider disinvestment is a step in this direction.

"It is the firm conviction of the government that the process of disinvestment is only meant to make Air India a much stronger world class airline capable of competing with others successfully. This would indeed be a win-win solution for employees," he wrote.