By Vrishti Beniwal and Shruti Srivastava
India will soon revive the sale of its money-losing flag carrier with new guidelines after a recent attempt ended in a debacle last month, as the proposed terms deterred potential investors.
Prime Minister Narendra Modi’s administration is ready to “re-examine” its privatization process, including a clause requiring a minority state stake in Air India Ltd., said Subhash Chandra Garg, a senior official in the Ministry of Finance. The government is considering various options and doesn’t intend to insist on keeping 24 percent of the company, he said.
“A certain kind of strategy was offered that didn’t find many takers and therefore something different will have to be done,” Economic Affairs Secretary Garg said in an interview in New Delhi on Monday. “There’s no fixed objective that government should have 24 percent. It can be re-examined.”
Modi’s most high-profile privatization plan ended in a whimper on May 31 as a deadline for prospective suitors passed by with none showing interest in the airline mired in almost $8 billion of debt. IndiGo, the nation’s biggest carrier, initially said it was keen but pulled out after the government made it clear it wasn’t selling Air India’s international operations separately.
While policy makers viewed the condition for a government stake as a “confidence building measure,” it was cited as one of the reasons for the lack of bids, Garg said.
The state retaining a stake in the airline — already expected to lose as much as $2 billion over the next two financial years — left open the “prospect of political interference on strategic and day-to-day matters,” the Sydney-based CAPA Centre for Aviation said this month.
Air India, which was offered along with $5 billion of its debt, is surviving on taxpayer bailouts after losing money for years. Previous attempts by the Indian government to dispose of the carrier were derailed by political opposition.
Vrishti Beniwal and Shruti Srivastava are authors at Bloomberg Quint.