The Ministry of Finance is currently working on the proposal to sell Air India. The proposal will include consolidating challenges such as volatility of exchange rates and crude oil which have hampered the government’s aim to attract potential buyers for the only national carrier of India.
The sale proposal will be placed before the Air India Specific Alternative Mechanism (AISAM). The AISAM will be reconstituted as Suresh Prabhu and Late Arun Jaitely are no more a part of the union cabinet. The Air India sale proposal will include an option of giving away either 100% or 76% of the government’s stake in the airline.
The Transport Minister Nitin Gadkari is a part of the AISAM and is expected to continue being a member of the panel after the reconstitution while the Finance Minister Nirmala Sitharaman and Civil Aviation Minister Hardeep Singh Puri will be included in the panel. The AISAM was constituted in the year 2017 by the then Finance Minister.
The government had invited bidders to sell 76% of its stake in Air India last year but failed to attract bidders. What was surprising was that despite transferring the control of management along with the sale, there were no bidders. This led the transaction advisor EY to prepare a report listing a range of possible reasons behind the failure.
A few of the many reasons listed is 24% government’s take and respective rights, volatility in the exchange rates, crude oil prices, high debt, the track record of profitability, and variations in the macro-environment. Also, there were restrictions placed on individuals to place bids.
The EY’s report was discussed last year in June in the AISAM meeting and was decided that the sale of Air India will be put off. It was also decided in the meeting to inject more funds into the troubled carrier, lowering the debt, and selling its non-core assets and subsidiaries.
Air India has been asked by the government to finalise its accounts and other financial reports for FY 2018-19 by June. The moment the accounts are ready, and if the AISAM gives green signal for the Air India sale, the Civil Aviation Ministry will delineate the Preliminary Information Memorandum (PIM). The PIM will provide information about the company and the eligibility of bidders.
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