Reconstruction board wants AI under its wing

Reconstruction board wants AI under its wing

New Delhi: The Board for Reconstruction of Public Sector Enterprises (BRPSE), which advises the government on reviving bankrupt state-owned companies, plans to bring Air India Ltd under its umbrella using its suo motu powers to study the fast-sinking national carrier, a move the aviation ministry has so far resisted.

The development comes as Air India’s turnaround plan has been questioned by some members of the group of ministers (GoM), and referred to a group of secretaries before a final decision is taken on its request for about 3,000 crore annually in equity over the next 10 years to stay afloat, Mint reported on 27 June.

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“The board should be allowed to exercise its powers to study Air India," said Nitish Sengupta, chairman, BRPSE. “We are awaiting their (aviation ministry’s) reply."

The board undertakes strengthening, modernizing, reviving and restructuring of public sector enterprises and advises the government on strategies, measures and schemes to meet this end.

BRPSE had sought to bring Air India under its ambit last year but the aviation ministry was not keen. The board has sent a fresh letter to the aviation ministry, Sengupta said.

“The difference is that conditions (in Air India) have become worse than last year," he said without elaborating.

Air India is estimated to have made an after-tax loss of 6,994 crore in 2010-11, wider than previous year’s 5,552.44 crore loss, Mint reported on 14 June.

Consulting firm Centre for Asia Pacific Aviation estimates Air India’s accumulated losses, working capital loans and vendor-related and aircraft-related debts, including for Boeing Dreamliner 787, will add up to about $20 billion by the end of this fiscal year.

The aviation ministry is likely to resist BRPSE’s move, a ministry official said, declining to be named.

BRPSE falls under the heavy industries ministry. Heavy industries minister Praful Patel, who dealt with Air India for six years as aviation minister till January, had ruled out bringing the carrier into the board’s fold. He declined comment on Sunday.

A retired aviation ministry official said BRPSE should be allowed to look into the state of the airline. “What is so special about Air India that it should not be allowed? But then, it would become a sick unit, which it is. To not call it sick at this time is absurd," said Sanat Kaul, a former joint secretary at the aviation ministry. “They should do it (aviation ministry). They are taking refuge in the fact that Nacil (National Aviation Co. of India Ltd) is a new company. But by now even Nacil must be three years old."

A public sector company needs to have made three consecutive years of losses to be studied by BRPSE.

Air India and Indian Airlines were merged on 30 March 2007 under Nacil (now Air India Ltd).

In 2001-02, Air India made a net profit of 15.44 crore while the erstwhile Indian Airline clocked a 246.75 crore loss. “Till 2002, there was no budgetary support to Air India," Kaul recalled. “There was nothing wrong with Air India, just that it was not well managed. But it was not sick."