Thursday, June 1, 2017

Maharaja in trouble: Niti Aayog recommends sale of Air India: Report

THE future of the national carrier seems to be under thick cloud with Niti Aayog reportedly recommending strategic disinvestment of loss-making Air India. This aims at preventing the Centre from spending more money for the revival of the airline.
The report will enable the Centre to initiate the sale of the airline. The report came in the wake of finance minister Arun Jaitley's support for stake sale in the ailing carrier.
Niti Aayog's fourth report, which was submitted recently, has detailed a possible roadmap for Air India disinvestment, which...
includes writing off loans to the tune of Rs 30,000 crore.
The national carrier has debt of around Rs 60,000 crore.
The proposal is to transfer the aircraft-related loans and the working capital to the new owner, while taking care of half the liability.
Similarly, Niti Aayog has suggested that the real estate assets, which includes prime properties in Mumbai's Nariman Point and some places in Delhi like Vasant Vihar, be hived off into a separate company before offering up to 100 percent equity to a strategic partner.
The airline has accumulated losses of about Rs 40,000 crore and has projected a cash deficit of Rs 3,000 crore for the current financial year with a gap narrowing to around Rs 1,700 crore annually in the coming years. Although Air India reported operating profit of Rs 105 crore in 2015-16, it is not seen to sustainable given that the annual interest burden is estimated at around Rs 4,000 crore.
The government has already pumped in Rs 25,000 crore into the airline over the last five years and is required to provide a similar amount in the coming few years.
Aviation minister A Gajapathi Raju and his deputy Jayant Sinha confirmed that Niti Aayog had submitted its report, but did not disclose the details. "We are very proud of AI and will consider all possible alternatives for it. All options are open. Niti Aayog has suggested steps for a strong and viable airline," said Raju at a press conference to mark three years of the Modi government.
Couple of days back, giving a clear indication about privatisation of Air India, Finance minister Arun Jaitley said that the government is open to the idea of inducting a strategic partner in Air India and the civil aviation ministry was exploring all possible options for the ailing state-run airline.
"Today they have a market share of 14 percent and a debt of Rs 50,000 crore. Your money does not go into private sector airlines such as Indigo, Spicejet, Go Air, Jet Airways then why should you put Rs 50,000 crore in running Air India? Government money means your money. This money can be used for education," Jaitley said during a panel discussion on Doordarshan News.
When asked about the government's strategy to deal Air India, the finance minister said that if a good management comes forward, government will consider disinvestment. Jaitley explained that of Rs 50,000 crore debt, nearly Rs 25,000 crore is the value of aircraft. The airline also has some other assets. The civil aviation ministry is exploring all options. "If 86% of the flying can be handled by the private sector they can handle 100% also," Jaitley said.
earlier, the government had tasked NITI Aayog to devise a road map for the beleaguered state run carrier, which may include recommendation for a strategic sale.
The finance minister also said that strategic sales in state run firms will gather pace in the next two years. "Let there be no misunderstanding that we are going slow on disinvestments. Leaving some sectors where the presence of the government is necessary, the role of the private sector in other sectors is very large," Jaitley said. The Modi government had promised to push ahead with strategic disinvestment, which involves ceding management control, when it swept to power in May 2014 but the process has made limited progress.
Earlier, NDA Government under AB Vajpayee had made efforts to sell a stake in Air India and the then disinvestment minister Arun Shourie had promised to push ahead with a strategic sale even if one bidder was in the fray. But the plans fell through and Air India continued as a state-run entity.
Estimates suggested that the airline has liabilities of over Rs 52,000 crore, with the interest burden alone estimated at Rs 4,000 crore a year. While Rs 25,000 crore has been pumped in over the last five years, a similar amount has been committed till 2032.

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