New Delhi: The government will infuse equity into Air India soon and also plan an initial share sale in the company by the second half of 2010, aviation minister Praful Patel said.
National Aviation Co. of India Ltd that operates Air India had initially asked the government for Rs4,000 crore in equity and debt as working capital and to support the capital expenditure of Rs44,000 crore it will incur in acquiring a new fleet, a process that began in 2005 and will continue for at least the next few years.
Its new requirement from the government will likely be higher, said officials in the civil aviation ministry. Air India will present the new number to the ministry soon, they said.
Share sale plan: Civil aviation minister Praful Patel. Harikrishna Katragadda / Mint
Patel said that the equity infusion by the government would help the airline reduce its debt:equity ratio and also fund its aircraft purchases.
The government’s decision to infuse equity into Air India, however, could be linked to the airline’s initial public offering, said Patel.
The government will sell shares in the carrier through an IPO “after an year” as there were a “lot of complexities” involved, he added but did not elaborate.
Indian carriers have lost an estimated $2 billion in the 12 months to 31 March and Air India is expected to have incurred losses of at least Rs3,000 crore for the same period.
Patel said that the ministry has earlier asked for foreign direct investment by foreign airlines in Indian carriers but that this was a decision that would be taken over a period of time by the government.
“Nobody took 49% FDI,” he said, referring to the 49% foreign investment allowed in Indian carriers currently, “Which airline in the world has got the money to give you good value today.?”
Government rules, however, bar foreign airlines from owning any stake in Indian airlines.