Sunday, Jun 26, 2022 | Last Update : 08:28 PM IST

  Business   Companies  29 Aug 2017  No foreign owners for Air India

No foreign owners for Air India

THE ASIAN AGE.
Published : Aug 29, 2017, 2:26 am IST
Updated : Aug 29, 2017, 2:26 am IST

Despite the fact that AI had reported an operating profit of Rs 105 crore in 2015-16, the Centre feels the debts continue to be insurmountable.

 Air India has a debt burden of about Rs 50,000 crore and a large part of it is due to the loans taken (about Rs 22,500 crore) for acquisition of a total of 111 aircraft in 2005-06.
  Air India has a debt burden of about Rs 50,000 crore and a large part of it is due to the loans taken (about Rs 22,500 crore) for acquisition of a total of 111 aircraft in 2005-06.

New Delhi: The Modi government on Monday indicated that it is unlikely to sell Air India to a foreign carrier in its consolidated Foreign Direct Investment policy.

The commerce ministry in its consolidated FDI policy document has also for the first time included start-ups, which can raise up to 100 per cent of funds from Foreign Venture Capital Investor (FVCI).

 

“The policy mentioned at para (c) above (foreign carriers allowed to own 49 percent in Indian carriers) is not applicable to M/s Air India Limited,” Center said in its consolidated FDI policy.

Para(c) said that foreign airlines are allowed to invest in the capital of Indian companies, operating scheduled and non-scheduled air transport services, up to the limit of 49 per cent of their paid-up capital.

It said such investment would be subject to conditions like it would be made under the government approval route.

There has been speculation that the Tata Group - in partnership with Singapore Airlines — may be interested in acquiring a majority 51 per cent stake in Air India if it is privatised. But, the FDI policy may mean that Tata’s proposal may not go through if it wants to bid for the PSU along with Singapore Airlines.

 

However, the government could change its policy in future on aviation, said experts.

Union Cabinet in June had given the green signal for disinvestment in national carrier Air India and five of its subsidiaries but left it to the Group of Ministers (GoM) to be headed by Union finance minister Arun Jaitley decide the extent of disinvestment.

Currently, the Union government is the sole owner of the national carrier. GoM will be set up to finalise modalities/details of the disinvestment, including the quantum of stake sale.

A major hinder in selling off Air India is the Rs 50,000 crore debt that the airline is reeling under, due to loans taken a decade ago when scores of aircraft were ordered. Speculation is rife that about Rs 25,000 crore debt could be waived off by the government which will then have to shoulder that burden.

 

Top sources had earlier said that 51 per cent or more of the airline’s stake could be sold by the government to a private entity, which will then mean that the airline is privatised. Another option is that the government allows Air India to remain a national carrier by controlling at least 51 per cent stake.

Air India has incurred losses worth thousands of crores but is surviving based on a bailout package of Rs 30,000 crore that began during the tenure of the UPA-2 government and which is continuing under the current government.

Tags: modi government, air india, arun jaitley