As the end of the financial year nears, and the Government is nowhere near mopping up even a small fraction of the Rs 1.05 lakhs it had budgeted to raise from disinvestment in 2019-20, panic seems to have set in. Seen from this perspective, the decision to put all of one hundred per cent stake in Air India for sale makes immense sense. It ought to have been done long ago. The earlier bid to sell off 76 per cent stake had attracted no offers. The sale offer has been sweetened in other ways as well. The prospective buyer will not have to pick up the entire Rs 62,000 crore debt, it has been slashed to about Rs 24,000 crores. And it is explained that this liability is more than compensated by the transfer of the 82-aircraft fleet with an average age of eight years. (The average lifespan of a commercial airliner can ordinarily stretch to about fifteen years.) Another deal sweetener is the lowering of the net worth of prospective bidders from the earlier Rs 5,000 crores to Rs. 3,500 crores. However, for an existing domestic airline operator there is no net worth condition. Some of the conditions in the March 2018 offer, however, remain in place. Such as the bar on foreign partners holding more than 49 per cent stake, or heading the board, or constituting more than a third of board membership. Besides, the existing base of Air India, new owners too will have to retain its name. Notably, aside from Air India, low-cost domestic airline Air India Express, and a 50 per cent stake in the ground-handling company Air India Singapore Airport Terminal Services too are to be sold off, as per the information memorandum issued on Tuesday. Land, buildings, including the iconic Air India tower in Nariman Point, Mumbai, and paintings bought by the airline over the years, however, are not for sale. In all likelihood, the sale offer would allow Air India to retain the space in all these buildings here and abroad whose ownership might continue to vest with the government but occupation on payment of reasonable rent will vest with the new owners. The prospective bidders might still have to contend with the huge workforce on the payrolls of Air India. Although the airline’s Chairman cum-Managing Director Ashwani Lohani has denied that it is saddled with excess staff, in the domestic aviation industry it is a public secret that Air India’s employee- to-aircraft ratio is in multiples of that in the private sector. It has over 16,000 employees, nearly 10,000 permanent. And its unions are used to dictate terms. Handling labour problems could well be a headache for the new owners, especially when the aviation sector is under stress due to high aviation fuel price.
Currently, most airlines are doing well thanks to moderate crude oil prices. The reason for the collapse of Jet Airways, one of the better run private airlines, may have made the Air India buy further attractive. It is another matter that so long as Jet Airways was operative it had wangled a most favourable treatment from the UPA regime. Then Civil Aviation Minister Praful Patel had gone out of the way to damage Air India, transferring lucrative West Asia routes to Jet or its foreign partner, and forcing the national airline to transfer highly valuable bilaterals and to virtually gift parking slots at the Heathrow Airport. Patel pushed the national carrier further into the financial crisis with his decision to merge the domestic Indian Airlines with Air India. It proved a very costly folly. Why Patel has not had to explain his collusive decision-making to wreck Air India from within is a mystery. At last, when Air India does get privatised, the taxpayers will be spared the burden of financing its losses with the infusion of thousands of crores of rupees every year. Meanwhile, even after the tight schedule set for the bidding process, actual disinvestment proceeds are unlikely to accrue to the government account till after the end of the current financial year. Which means that the Rs 1.05 lakh crore disinvestment target set by Nirmala Sitharaman in her maiden budget will remain largely unmet.
