An official from the Ministry of Finance mentioned that India is ready to sweeten the deal for the sale of Air india, the loss-making state owned carrier.
The government is thinking of letting potential suitors decide how much of Air India’s debt they want to take on as part of the deal.
The bid date is also likely to be extended beyond October 30 for the same
Tuhin Kanta Pandey, Disinvestment Secretary, said, “The bid date is also likely to be extended beyond October 30 to give investors time to make an offer. We will remove the constraints that the current structure of the transaction poses for investors. We are now thinking of letting the market determine the level of debt. That means we don’t freeze it.”
According to the current rules, bidders have to take over Air India’s aircraft debt of USD 3.3 billion, deterring buyers. Since its 2007 merger with state-owned domestic operator Indian Airlines Ltd., the carrier has been unprofitable. It has constantly depended on taxpayers’ money to keep flying.
“It is very difficult for the government to keep on sustaining Air India. Winding up could be disastrous. The only course now is to proceed toward disinvestment,” added Pandey.
Air India’s sale is important to the government’s plan of meeting its asset sale target of INR 2.1 trillion (USD 28.6 billion) in the financial year to March. COVID-19 has already affected tax revenues and disturbed asset sale plans. Less than 5 percent of the targeted amount has been raised so far.
Economists predict that the shortfall will blow out the deficit to more than double the budgeted 3.5 percent of GDP
Pandey mentioned, “The government is reworking its strategy according to the changed situation. It has decided not to raise money via exchange-traded funds, avoid repeated offer-for-sale for the same stock, and encourage buybacks, besides trying to conclude the sale of state companies such as Bharat Petroleum Corp.”
Pandey further said that the asset sale aim might not be achieved., “Budget has no meaning in a COVID-19 situation. We will not get into budget target. What we are saying is what is possible post coronavirus.”