Air India stake sale: Government to wait for better market conditions

At the end of March 2017, Air India a debt burden of around Rs 48,877 crore. Of the total amount, Rs 17,360 crore was related to aircraft and Rs 31,517 crore pertained to working capital loans. In May, Air India's market share stood at 12.8 per cent.

By: ENS Economic Bureau | New Delhi | Updated: July 5, 2018 3:00:17 am
AI stake sale: Govt  to wait for better market conditions CCEA on Wednesday approved enhancing the expenditure for operation and maintenance of Air India’s VVIP aircraft to `534.38 crore plus taxes for 2016-17. (Representational Image)

The government has decided to “wait and watch” for the next three-four months before taking a call on disinvestment of national carrier Air India due to prevalent market condition specially high fuel prices, Union Minister Nitin Gadkari said on Wednesday. The government’s proposed stake sale in Air India failed to attract any initial bidder when the deadline for bidding ended on May 31. The minister said given the high fuel prices at present, the viability of the move will be judged before going ahead with the disinvestment process.

“Market condition is not right for Air India disinvestment now. In view of this we are keeping a wait and watch policy for the next three to four months,” Gadkari said, as per a PTI report. As per the Air India disinvestment plan, the government had offered to sell 76 per cent stake in the national carrier along with complete stake sale of low-cost arm Air India Express and sale of its 50 per cent stake in Air India SATS Airport Services Pvt Ltd, which is an equal joint venture with Singapore-based SATS.

At the end of March 2017, Air India a debt burden of around Rs 48,877 crore. Of the total amount, Rs 17,360 crore was related to aircraft and Rs 31,517 crore pertained to working capital loans. In May, Air India’s market share stood at 12.8 per cent.

Meanwhile, in a relief to the national carrier, the Cabinet Committee on Economic Affairs on Wednesday approved approved a proposal to enhance the expenditure for operation and maintenance of Air India’s VVIP aircraft to Rs 534.38 crore plus taxes for 2016-17, from Rs 336.24 crore which was fixed in October 2011. Air India engages the ‘Special Extra Section Flights’ (SESF) or VVIP aircraft such as the Boeing B747-400 for the President, the Vice President and the Prime Minister. The costs on account of these flights are reimbursed to Air India by the respective ministries.

The CCEA has given its approval to enhance the expenditure for Air India’s “SESF operations from Rs336.24 crore plus applicable taxes to Rs.534.38 crore plus applicable taxes for 2016-17 with built-in annual escalation of 10% to compensate the cost of living index and exchange fluctuation for the maintenance of B747-400 aircraft,” the government said in a statement.

Since the last revision in October 2011 in fixed maintenance costs, there has been a substantial increase in the expenditure incurred by Air India on maintenance of these aircraft because of increase in the cost of living index, depreciation of the rupee against the US dollar and increase in the material cost, the statement said.

“It is therefore necessary to review the estimates/ reimbursements provided to Air India since the year 2011-12 as the cost base has not been indexed to inflation. Since, AI is suffering financial losses, the airline cannot afford to provide any services below its cost,” it said.

The writer is principal secretary, sport and youth affairs, Government of Haryana. Views are personal

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