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Business News/ Companies / Govt to form panel on Air India’s future

Govt to form panel on Air India’s future

Panel of bankers, aviation experts and technocrats to help turn around airline and examine privatization

Air India has sent a list of half-a-dozen people to the civil aviation ministry who it said can be part of the committee. Photo: Abhijit Bhatlekar/MintPremium
Air India has sent a list of half-a-dozen people to the civil aviation ministry who it said can be part of the committee. Photo: Abhijit Bhatlekar/Mint

New Delhi: The government will form a committee within the next fortnight comprising bankers, aviation experts and technocrats to help turn around and look at privatizing money-losing national airline Air India, two government officials aware of the matter said on Thursday.

Deepak Parekh, chairman of India’s oldest mortgage lender; E. Sreedharan, former chairman of Delhi Metro Rail Corp.; M. Damodaran, former head of the Securities and Exchange Board of India (Sebi), and other people of similar stature are being considered for appointment to the panel, said the two officials.

Air India has sent a list of half-a-dozen people to the civil aviation ministry who it said can be part of the committee. These names include former bureaucrat Naresh Chandra and former Reserve Bank of India (RBI) governor Y.V. Reddy.

The committee will be required to submit a report within three months of being constituted.

It’s the latest effort by the central government to turn around Air India, which made a loss estimated at 5,389 crore in the year ended 31 March and has accumulated losses of $5 billion in addition to total debt of 40,000 crore. The government, in 2012, promised an equity infusion of 30,000 crore till 2021 to bail out the airline. Of this, it has already infused nearly 18,000 crore.

Air India’s woes date back to a failed merger with Indian Airlines, another state-owned airline (the latter flew domestic routes and a few international ones in the neighbourhood; the old Air India flew only international routes) in 2007 and laxity on the part of India’s aviation ministry that effectively allowed international airlines to expand their presence in India without any reciprocal benefit for Air India.

“Air India is bleeding the country. Every year we have to pump in 6000 crore," one of the two government officials cited above said on condition of anonymity, adding that the mandate of the committee would be to “look at making the airline better—cut costs and increase revenues, before privatization".

A second government official confirmed the move to appoint a committee. Under the 2012 plan, the government was to take a relook in 2015 at the effort to turn around the airline’s fortunes and explore the possibility of privatizing it, this official said, also on condition of anonymity.

On Saturday, civil aviation minister Ashok Gajapathi Raju and minister of state for aviation Mahesh Sharma are expected to conduct a full review of Air India.

Any move to privatize the airline will likely be opposed by its multiple unions.

In the National Democratic Alliance’s third term in power (it ruled for 13 days in 1998 and then, again, 13 months between 1998 and 1999) between 1999 and 2004, it did consider privatizing the airline but nothing came of that.

To some analysts, Air India exemplifies the worst of India’s state-owned companies and is often cited as an example of why the government should not be in business.

“Air India can no longer remain under government ownership; the carrier must be privatised, with a strategic airline partner to participate," consulting firm Capa Centre for Aviation wrote in a May report. “Despite significant recent improvements in its operating and financial performance, the likelihood is that despite the best intentions of Air India’s management the carrier faces almost insurmountable challenges. Due to the intensifying competition on both the domestic and international fronts performance may once again start to deteriorate from FY2016 onwards."

“The change of government is an appropriate time for bold, decisive action on the ownership of Air India. The carrier should be restructured and privatised with the freedom to seek a viable airline partner as part of the privatisation," Capa wrote.

The consulting firm recommended that a ‘Council for the Future of Air India’ be set up with the objective of preparing a plan outlining the circumstances under which the privatisation would be possible.

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Published: 05 Dec 2014, 12:02 AM IST
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