The troubles of India's national air carrier are well known. The airline, which is functioning in the most modern and cut-throat industry against other players who are run by executives trained in the business, has long been accused of being treated like a government department rather than a company.
This has been labelled as one of the reasons behind the losses that Air India finds itself in. The carrier which was nationalised after independence has seen losses mount despite various attempts to change the norm ever since Air India and Indian Airlines were merged in 2007 by the UPA government.
And following what are seen as failed attempts to make the airlines profitable, Niti Aayog, the government's think tank, has now recommended a strategic disinvestment of the airline in order for the government free up funds for allocation in areas where they are more needed such as health and education, rather than an industry which is not one of the governments' core responsibilities.
The report prepared by the Aayog, also lays down the groundwork for the government to start the procedure of Air India's sale, a decision on which is expected to be taken by the cabinet. Arun Jaitely is reported to have given support to such a process.
The think tank's report, submitted recently, details a roadmap for the national carrier's disinvestment, and includes writing off loans to the tune of Rs 30,000 crore from the airline's debt of around Rs 60,000 crore, which includes nearly Rs 21,000 crore of aircraft-related loans and around Rs 8,000 crore working capital, according to reports in TOI, a nation daily.
The proposal reportedly wants the government to transfer the aircraft-related loans and the working capital to whoever takes over the company while taking care of half the liability itself.
As per reports, the Aayog has also suggested that company's assets in the real estate, including prime properties in Mumbai's Nariman Point and places in Delhi like Vasant Vihar, be transferred to a new company before the rest of the company is put up for sale. The new owner will also enjoy many other rights that Air India currently enjoys, with reports claiming that officials have suggested that a need to have a designated national carrier does not exist in India.
One of the biggest reasons in the government not being able to have taken a step such as the sale of the company so far has been the employees of the airline who have resisted any such attempts. And if such a sale is completed, these employees will move to the new private company instead of being government employees as of now.
Air India is reported to have accumulated losses of around Rs 40,000 crore and the cash deficit is projected around of Rs 3,000 crore for the current financial year, with the gap expected to narrow down to around Rs 1,700 crore annually in the coming years. Rs 25,000 crore have already been put into the airline over the last half-a-decade, and it is expected to be required to put a similar amount in the coming years.
"The Aayog's recommendation is very clear: find a strategic investor for AI. Now that is a call for the owner to take. Some initial clarity on the future course may come in the next 15 days or so," TOI has quoted a source as having said.
According to reports, Civil Aviation Minister A Gajapathi Raju has confirmed that the Aayog had submitted its report, but refused to disclose the information in the report. "We are very proud of Air India 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 recently.
The recommendations come at a time when foreign airlines have been allowed to buy a stake up to 49 per cent in Indian joint venture carriers. An option that has already been taken by many including, Singapore Airlines and AirAsia which have a tie-up with Tata Group in Vistara and AirAsia India, respectively, while Etihad has a 24 per cent stake in Jet airlines. And on the issue, whether foreign airlines would be able to pick up a stake in Air India, the minister is reported to have said that the government is "open to all options."