Govt clears privatisation of A-I and equity hurdle

The CCD also cleared the sale of up to a 74 per cent stake in another ailing PSU, Hindustan Teleprinters Ltd, Jaitley said. The CCD, however, deferred a decision on disinvestment in Kudremukh Iron Ore and National Mineral Development Corporation, Indian Oil, Hotel Corporation of India and Pawan Hans.

Air India has been making losses for the past five years in a row — it made a loss of Rs 174 crore in 1998-99 which was reduced to Rs 75 crore last year — and had asked for a fresh cash infusion of Rs 1,000 crore to keep it afloat. The demand was not accepted by the Ministry of Finance.

As a result of such huge losses, A-I has long-term debts of around Rs 3,500 crore as against its fixed assets of around Rs 3,900 crore, and its net worth fell dramatically from Rs 1,435 crore in 1994-95 (the last year it made profits) to Rs 425 crore in 1998-99.

Briefing newspersons after the meeting, Jaitley said 40 per cent equity would be retained by the Government. Of the 60 per cent to be disinvested, 40 per cent would be offered to a strategic partner. However, foreign investors can pick up only 26 per cent within this 40 per cent. Jaitley said that 10 per cent will be offered to the employees through stock options and the remaining 10 per cent will be for domestic financial investors as well as financial institutions. He said, therefore, out of the 100 per cent holding, 74 per cent would always be with Indians.

The CCD also recommended appointment of a global advisor to advise it on a detailed management structure. He said the advisor would also recommend in whom to vest management control.