August 8, 2017 TnH Global

Government to float RFP for merchant bankers over Air India disinvestment

The government will soon float a request for proposal (RFP) for selection of transaction advisor, legal advisor as well as asset valuer for the proposed disinvestment of national carrier Air India.

The Cabinet Committee on Economic Affairs (CCEA), the apex body for formulation of government’s economic policies, had on June 28 granted its in-principle approval for considering strategic disinvestment of Air India and five of its subsidiaries, which include Air India Express as well as engineering and ground handling units.

“The announcement of RFP for appointment of a transaction advisor, a legal advisor and asset valuer is expected to be made soon for disinvestment of Air India,” an airline source said. Though the government has not yet set any timeline for disinvesting its stake in the loss-making flag carrier, the whole process is expected to be completed in 12 months to 18 months time.

“The announcement of the RFP will set in motion the stake sale process,” the source said.

A group of ministers, headed by Finance Minister Arun Jaitley, has been mandated to decide on the treatment of unsustainable debt of Air India, hiving off certain assets to a shell company, spinning off and selling stakes in three profit-making subsidiaries, the quantum of disinvestment, and the eligibility criteria for the bidders. Launched by JRD Tata as Tata Airlines in 1932, its name was changed to the Air India in 1946. The government decided to take it over in 1953.

Air India, which has a debt burden of more than Rs 52,000 crore, is staying afloat on taxpayers money. The previous UPA government had extended bailout package worth little over Rs 30,000 crore to the national carrier for a ten-year period starting from 2012.

Air India’s net loss after tax narrowed to Rs 3,643 crore and operating profit rose to Rs 300 crore in the last financial year, Minister of State for Civil Aviation Jayant Sinha had informed Parliament last month.

The airline’s total debt stood at Rs 48,876.81 crore (provisional figures) at the end of March 2017 and the out go on account of servicing the debt stands at around Rs 6,000 crore.

The employees’ unions at Air India are opposed to the privatisation of the two government-run entities.

Air Corporation Employees Union (ACEU), which is a grouping of Air India’s non-technical staff and comprises nearly 8,000 of the total 21,137 employees, has termed the decision as ‘arbitrary’.