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Business News/ Companies / News/  Narendra Modi said to be considering Air India privatization
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Narendra Modi said to be considering Air India privatization

As part of Air India privatization plans, the Narendra Modi government may ask the buyer to absorb debt of about Rs20,000 crore linked to aircraft purchases

Air India made an operating profit of about Rs100 crore in the year through March 2016. BloombergPremium
Air India made an operating profit of about Rs100 crore in the year through March 2016. Bloomberg

New Delhi: Indian Prime Minister Narendra Modi is actively considering a proposal to privatize state-run Air India Ltd, possibly asking the buyer to absorb loans of about Rs20,000 crore ($3.1 billion) linked to aircraft purchases, a person with direct knowledge of the matter said.

The deliberations follow recommendations by a government panel for the sale of the money-losing carrier that has nearly $8 billion in debt, the person said, asking not to be identified because the discussions are private. As for the rest of the flag carrier’s debt, the government has yet to decide whether to write off or reorganize it, the person said.

ALSO READ: Privatize Air India, now

The process may include disposing of Air India’s real-estate and other non-core assets worth about $3 billion before the sale or hiving them off, the person said. Air India spokesman Dhananjay Kumar and a spokesman for Modi didn’t immediately respond to requests for comments.

Unprofitable for a decade with taxpayers bailing it out in the past six years, Air India’s appeal to any investor is contingent on the government’s ability to write off the debt not backed by assets. That is a political call Modi needs to take at a time when many of the nation’s state-run lenders have been seeking capital injection from taxpayer funds amid mounting bad loans.

ALSO READ: Air India’s failure points to inadequacies of bureaucrats as PSU leaders

“Air India is a good vehicle for an investor if the non-aircraft related debt is taken care of and the balance sheet is cleaned up seriously and completely," said Kapil Kaul, South Asia CEO at Sydney-based CAPA Centre for Aviation. “This is going to be the fastest growing market for several years."

Niti Aayog, the government’s top policy planning body, has suggested options for the future of Air India and the government is open to all of them, civil aviation minister Ashok Gajapathi Raju said on 30 May, declining to elaborate on what the options are. Air India isn’t sustainable with the current financial position, Niti Aayog vice-chairman Arvind Panagariya said in a Bloomberg event on 26 May.

ALSO READ: Govt to prepare Air India revival plan within 3 months, amid calls for privatization

The carrier’s share in the local market has shrunk to 12.9% from 35% a decade back, placing it joint-third along with SpiceJet Ltd. The company made an operating profit of about Rs1 billion in the year through March 2016, aided by a drop in oil prices. It still posted a net loss of Rs38.4 billion, according to the government.Bloomberg

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Published: 31 May 2017, 10:35 PM IST
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