A debt burden of nearly Rs 50,000 crore may not be the only hurdle in the way of government’s plans to divest its stake in Air India, with the airline facing a number of internal issues such as a criminal case against the purchase of aircraft, and its land holding. A senior government official said that a 100 per cent stake sale of the airline would be difficult, considering it would make all the files of Air India private property of its new owner, and the ongoing case by the Central Bureau of Investigation (CBI) into the purchase of 111 aircraft might face hurdles because of it.
In May, the CBI filed 3 FIRs and launched a preliminary enquiry to probe alleged irregularities in the Indian Airlines-Air India merger, along with the purchase of 111 aircraft, leasing of planes and giving-up of profit-making routes by Air India. These decisions, as per the CBI, caused a loss to the tune of thousands of crores of rupees to the exchequer. These FIRs were registered for offences of criminal conspiracy and corruption against unidentified officials of the civil aviation ministry and Air India.
In a report tabled in Parliament in January 2012, CAG had flagged these irregularities and called the decision to buy 111 planes by Air India “a recipe for disaster”. It said the aircraft acquisition through debt had “contributed predominantly” to the airline’s massive debt liability.
On Tuesday, Minister of State for Civil Aviation Jayant Sinha said in the Rajya Sabha, that Air India’s net loss has fallen to Rs 3,643 crore for 2016-17, compared with Rs 3,836.77 crore in 2015-16, and Rs 5,859.91 crore in 2014-15.
Furthermore, Air India holds large chunks of land across the country, much of which is buried deep down in the company’s records. “Air India is working on preparing a list of all the land and building assets it holds, but it appears it would take a long time for that to happen. Some land parcels are held in far-flung areas of the country, and many officials are unaware about it,” a company official said, on the condition of anonymity.
The official said that Air India could not undertake the sale of many of these properties considering they were held by the airline on a lease from other parties. These include the company’s office building at Airlines House on Gurudwara Rakabganj Road in New Delhi, and the residential colony at Vasant Vihar, which are built on land leased by the airline from the urban development ministry. Furthermore, the Air India building at Nariman Point in Mumbai, is also built on land leased from the Maharashtra state government.
On June 28, when the government announced the Union Cabinet’s in-principle approval for disinvestment of Air India, it also said it has set up a committee headed by finance minister Arun Jaitley to guide the strategic disinvestment process. The government official cited above said that the decisions to sell these Air India assets are expected to come up in the high-level panel’s meeting, which is likely to be held soon. However, considering the issues pertaining to leased real estate assets, the government may not be able to monetise all these assets. This, the official said, could prove to be a hurdle in the airline’s debt-reduction exercise.