The government has for now dropped plans to sell majority stake in Air India as it may not be the right time to privatise the loss-making flag carrier in an election year, a top official said today.
Civil Aviation Minister Suresh Prabhu said a decision on the fate of privatisation plan was taken at a meeting yesterday after considering factors like state of global aviation industry and oil prices.
"Yesterday we had a meeting, so we have already decided," Prabhu told reporters here today.
"Because airline industry globally is losing and particularly with increase in oil (prices), the environment is becoming challenging for the airline industry. So we reviewed it and said we will review it later," he said.
The top official involved in the process further said the meeting decided not to pursue the stake sale in Air India in an election year and instead provide enough funds to meet the operational needs of the debt-laden national carrier.
The meeting, chaired by Union Minister Arun Jaitley, had Officiating Finance Minister Piyush Goyal, Prabhu and Transport Minister Nitin Gadkari in attendance.
The move comes within weeks of the Modi government's biggest privatisation move failing to attract even a single bidder.
The official, who wished not to be identified said, "The airline is posting operational profits. None of the flights go empty. With all the cost efficient mechanism in place, we will continue improving its operational efficiency. There is no need to rush in for disinvestment as of now." The government is looking at turning around the company to ensure that it makes profits on overall basis before going in for listing, he said.
"Right now, the environment is not good for the airline business... That was the view expressed by everybody," he said.
Debt-laden Air India is staying afloat on taxpayers' money and has been grappling with financial woes, including delay in payment of salaries to employees.
After no bids were received for the proposed 76 per cent stake in Air India when the deadline ended on May 31, officials had indicated that the government was open to dropping the initial plan to retain 24 per cent stake in the airline. It was also said that listing the loss-making airline could help unlock value for the government while retaining control.
But the government official, quoted earlier, said the listing of Air India was not on the immediate agenda of the government.
"Certain conditions have to be met before listing a company. Once Air India fulfils those, we will go in for an initial public offering and subsequent listing," the official said.
As per Sebi norms, a company has to post profit in previous three financial years before it can list itself in the stock exchanges.
"The focus is on improving operational efficiency. We will continue to boost employee morale, starting from the top level, to better the functioning of the airline. Funds would be provided as and when required," the official said.
In May, Air India's market share stood at 12.8 per cent, as per latest official data.
The official said there are also suggestions that professionals from the private airlines industry could be roped into manage certain activities at Air India.
Under the proposed plan, the government was to sell 76 per cent stake in Air India along with complete divestment of low-cost arm Air India Express and a 50 per cent stake in Air India SATS Airport Services Pvt Ltd -- an equal joint venture with Singapore's SATS.
In nearly two decades, Air India stake sale has not taken off twice. Back in 2001, during the then NDA government, the disinvestment process was scrapped.
At the end of March 2017, the carrier had a debt burden of around Rs 48,877 crore. Out of the total amount, Rs 17,360 crore was related to aircraft and Rs 31,517 crore pertained to working capital loans.
Air India makes more than 2,300 flights weekly to 54 airports and has 2,543 landing slots at international airports including New York, London, Paris and Tokyo.
(This article has not been edited by Zeebiz editorial team and is auto-generated from an agency feed.)