In a recent blow to already deteriorating situation of Air India, the Centre has decided to disinvest its stake from the entity owing to the recommendation made by the Niti Aayog. It is significant to note that such strategic disinvestment would also trigger disinvestment from its others subsidiaries – Air India Engineering Services, Air India Transport Services, Air Services Private Limited, Air Alliance and Air India Express. This move has been touted to be considered owing to the fact that Air India has undergone a vegetative state of incurring losses for over a decade now, further the mounting amount of debt has paralyzed the Government's’ ability to cope up with revival of the Airlines. As quoted by Ashwani Lohani, Chairman and Managing Director in his recent interview “mountain of debt which the present management acquires appears insurmountable and is at the root of all the problems”.
It is noteworthy that the Parliamentary Committee on the issue has expressed serious concerns with respect to the recommendations made by the Niti Aayog. The Committee is of the view that Air India should be given a further time of 5 years (as has been originally envisaged in TAP And Financial restructuring plan 2012-2022) to ensure its revival. The committee also observed that the ineffective Turnaround Plan that bottlenecked the flow of funds to the airlines has been the root cause of Air India’s operation and financial inefficiencies which resulted in huge debt amount. Further Air India has been proved to be of great national importance the at times of social and political unrest and therefore weighing the significance of such entity merely on profit making efficacies would be unjust unfair. Further if such disinvestment is effected, it would render many employers and staffs jobless which would further intensify the issue at hand.
Also, the committee has put forward its opinion on the basis of signs of increasing profit relating to the fact that the Airline is all set to increase its operating profit up to Rs. 531 Crores from Rs. 215 crores (2016-17).
However on a positive side, post the announcement of such disinvestment by the Government a number of market players have shown their interest in putting their stakes in the airline. One of the India’s most successful and cost effective airlines IndiGO has communicated its interest to Aviation Ministry to take over Air India’s International operations. Any formal decision and further information with respect to disinvestment is yet to be notified. For now, a Panel of Ministers has been made which shall be headed by Mr. Arun Jaitely to analyse the complexities and various nuances of such disinvestment and to make detailed proposal. Such proposal is expected to include information pertaining to foreign investment, division of operations, manner of sale of stakes and assets etc.
Courtesy/By: Lalit Saraf
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09 Jan 2018
