Govt may drop debt condition for Air India bidders: Report

Potential Air India buyers may not have to acquire the airlines' $3.3 billion of debt

INDIA-AIR INDIA/

One of the biggest stumbling blocks for any potential buyer of Air India has been the flagship airline’s debt—around Rs 28,000 crore of its debt will have to be acquired by any potential buyer—this, after the debt burden for a buyer itself was halved by the government in 2019 by only including debt from plane purchases.

Now, according to a Bloomberg report, the government may consider waiving the condition that the buyer takes on approximately $3.3 billion of debt.

Citing sources with knowledge of the matter, Bloomberg said the administration was being asked to drop the rule as it would deter buyers, with potential buyers to be allowed to bid on Air India’s enterprise value instead of its entity value.

In August, the government extended the deadline for prospective bidders by two months. While the sale was initially expected by the end of 2019, this did not take place. The pandemic further delayed proceedings. Aviation Minister Hardeep Singh Puri had told parliament earlier that Air India would have to shut down if no buyer was found. 

As many as 20 Central Public Sector Enterprises (CPSEs) and their units are at various stages of strategic disinvestment, while six are being considered for closure or are under litigation, Minister of State for Finance Anurag Singh Thakur said on Monday.

In a written reply to a question in the Lok Sabha, Singh said the government follows a policy of disinvestment through a strategic stake sale and minority stake dilution.

"Based on the criteria laid down by NITI Aayog, the Government has 'in principle' approved strategic disinvestment in 34 cases since 2016, out of which strategic disinvestment in 8 cases has been completed, 6 CPSEs are under consideration for closure and litigation, and remaining 20 transactions are at various stages," Singh said.

Singh said strategic disinvestment implies the substantial sale of government shareholding of CPSEs, which are not in priority sector, along with transfer of management control.

Asked what steps are being taken by the government to safeguard employees' interest, Singh said upon strategic disinvestment, the management control of the company shall be in the hands of the strategic buyer.

"While deciding the terms and conditions of the strategic sale, employees' concerns are suitably addressed through appropriate provisions made in the Share Purchase Agreement (SPA) to be signed by the Government with the strategic buyer," he added.

With inputs from PTI

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