A panel of ministers led by Home Minister Amit Shah is soon expected to give its approval to the sale of Air India to Tata Sons after the conglomerate emerged as the frontrunner to acquire the national carrier.
The committee nod will be followed by an approval from the Union Cabinet headed by Prime Minister Narendra Modi. Moneycontrol has learnt from officials that both these processes are expected to be completed as early as this week even as the final negotiations take place between representatives from the government, the airline and Tata Sons.
The empowered group of ministers led by Shah is known as the Air India-Specific Alternative Mechanism (AISAM). It also includes Finance Minister Nirmala Sitharaman, Commerce Minister Piyush Goyal and Aviation Minister Jyotiraditya Scindia.
As reported earlier, Tata Sons may be willing to pick up around 15 percent of the airline's debt load. Although the conditions under which it would be done are yet to be known, sources confirmed that it was a major part of the discussion between the government and the Tata Group.
The government, as part of its current attempt to sell off its 100 percent stake in Air India, had changed the bidding norms in October 2020, and sought bids based on enterprise value. According to the new plan, the successful bidder does not have to absorb any predetermined debt. Air India has a net debt of around Rs 60,000 crore.
Of Air India's total enterprise value, as part of the formula, a minimum 15 percent will go to the government and the rest will be used to reduce existing debt. As part of the current plan, the government will also divest its 100 percent stake in Air India, Air India Express and a 50 percent stake in ground handling company AISATS.
Tata Sons have also sought a sovereign guarantee against any pre-acquisition financial or legal claims that Air India may face.
People in the know have told Moneycontrol that the government has likely set the minimum reserve price for the sale of the national carrier at Rs 15,000 crore. The government will not accept offers of anything below this price.
It is not immediately known if Tata's or Spicejet Chairman Ajay Singh's bids are above the reserve price or not, though media reports indicated that Tata had the higher bid. Singh had bid in his personal capacity.
Senior officials in the civil aviation ministry and Air India also told Moneycontrol that SK Mishra, the government-appointed director on the board of the airline will take over everyday operations until the government takes a decision on selling off the carrier.
Following the appointment of Rajiv K Bansal as the Secretary of Ministry of Civil Aviation on October 1, the post of the Chairman and Managing Director at Air India lies vacant even though the airline. is headed for divestment.
The Union Budget
for 2021-22 has set a divestment target of Rs 1.75 lakh crore. Officials expect that this target will be mostly met through the privatisation of Air India and Bharat Petroleum, and the listing of LIC Ltd.