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The Union Cabinet on Wednesday gave an in-principle approval for disinvestment of debt-laden state-run carrier Air India. The move is a step forward for privatisation of the national carrier which has been riddled with inefficiencies and mismanagement.
Finance Minister Arun Jaitley said the government will form a Group of Ministers to explore ways to divest its equity stake in Air India. The GoM will also decide on the modalities of the proposed disinvestment, including the quantum of the stake to be diluted and ways to deal with the carrier’s existing debt, Jaitley said.
Jaitley did not mention what percentage of stakes will be sold and what will be the process to sell the ailing airline.
Besides, the government has also accepted the NITI Aayog suggestions on privatisation of Air India.
Stretched thin by competition from leaner and budget airlines, Air India is reeling under a debt of over Rs 52,000 crore, with about Rs 28,000 crore in working capital debt, and about Rs 4,000 crore in interest burden alone. The national carrier has not turned profit in 10 years.
From commanding a 35% share in mid 2000s, Air India’s domestic market share has reduced to just 14%. The airline stands behinf IndiGo and Jet Airways in the pecking order. On the overseas traffic to and fro India, it has a 17% share.
Prime Minister Narendra Modi's government has been exploring options to privatise the national carrier which is currently surviving on Rs 30,000 crore bailout by the previous government.
Earlier this month, Tata Group chairman N Chandrasekaran had informal talks with the government. Media reports also suggested that the Tatas could get Singapore Airline on board for a minority stake.
Recently, Jaitley had said that if private airlines can handle 86% passengers, then they can also handle 100% passengers. Considering the current situation of Air India, Jaitley said, "We should have ideally exited Air India a decade and a half ago".
Even Civil Aviation Minister Ashok Gajapathi Raju said last month that there were "hardly any bakras (scapegoats) around" to buy the loss-making national carrier unless its massive debt was written off first.
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