Govt shoots down Sharad’s plan to fatten I-A before sell-off

Yadav had vociferously argued at the meeting of the Cabinet Committee onDisinvestment (CCD) two months ago that before selling any Public SectorUndertaking, the government must make it viable in order to fetch a goodprice in the market.

However, the government did not accept Yadav’s contention. It conveyed toYadav in no uncertain terms that no funds can be made available to the I-Ato acquire new aircraft to bring down the employee-aircraft ratio or toimprove its functioning as the I-A is in the process of being disinvestedsometime in 2001.

In a one-page letter dispatched by Union Finance Minister Yashwant Sinha toYadav, he said disinvestment and infusion of fresh funds could not gosimultaneously.

It is clear from the tone and tenor of Sinha’s letter that he had written toYadav after discussing the issue with the Prime Minister. Before hisdeparture to the US on August 31, Sinha wrote to Yadav saying that he was inreceipt of his (Yadav’s) letter dated August 7 regarding the release offunds of Rs 325 crore for aircraft acquisition.

Sinha went on to remind Yadav, “As you are aware, the government hasalready taken a decision to disinvest 51 per cent of its equity in the I-A,of which 26 per cent will be given to a selected strategic partner alongwith the management control, and the balance 25 per cent would be given toFinancial Institutions, public and the employees.

Since the Department of Disinvestment had already set the process ofdisinvestment in motion, it would not be prudent for the government to gofor disinvestment and at the same time infuse additional equity into thecompany.

Sinha also cautioned Yadav that even while taking aircraft on lease (eitherdry or wet or by other arrangement) for meeting the operational needs andrestrict the proposals for acquisition to a bare minimum.

Sinha went on to add that a decision on the type and number of aircraft tobe inducted in any airline is a very critical management decision on whichthe new management should have a say.

However, Sinha gave Yadav an escape route too by suggesting that if he stillwanted he could take his proposal to the Public Investment Board (PIB) toget the same appraised.“A view on government support can be takenthereafter,” said Sinha.

It may be mentioned that the I-A is in dire need of aircraft. Though itdeclared a profit of Rs 79 crore last year, it is set to lose money thisyear due to various factors beyond its control.

After Sinha’s missive, the I-A is contemplating to acquire aircraft on drylease or even take old aircraft from Air India on lease. But its effortshave not met with any success so far.