The Tata Group has won the bid for the loss-making state-run airline company Air India. According to sources, Tata Group will be the new owner of Air India. A panel of ministers had last week advocated for giving Air India to the Tata Group, describing the Tata Group as the strongest among all in the proposal to take over the airline.

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On Thursday, September 30, this report was discussed in the meeting of the Core Group on Disinvestment. A meeting of the committee of ministers on Air India disinvestment is to be held next week. An official announcement is expected after that meeting, which will be headed by Union Home Minister and Minister of Cooperation Amit Shah.

 

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The government wants to complete the process by October 15 so that Air India can be handed over to the new owner by December 2021.

However, Secretary, Department of Investment and Public Asset Management (DIPAM), has tweeted, "Media reports indicating approval of financial bids by Government of India in the AI disinvestment case are incorrect. Media will be informed of the Government decision as and when it is taken."

 

What happened so far

The process of disinvestment of Air India is in the final stages. The last date for financial bidding for this was September 15. However, the government had earlier extended the deadline for the preliminary bids 5 times. Air India has a debt of about Rs 60,000 crore. It is incurring a loss of Rs 20 crore per day. Minister of State for Road Transport & Highways and Civil Aviation Vijay Kumar Singh had also told Parliament in July this year that the financial bids for the aviation company would be received by September 15. 

The government is selling its 100 percent stake in Air India. It is in loss after the merger with domestic operator Indian Airlines in 2007. 

According to experts, the bidders for Air India include Tata Group and SpiceJet promoter Ajay Singh. The successful bidder who buys Air India will be given control of 4,400 domestic and 1,800 international landing and parking allocations at domestic airports. The successful bidder will also get 100 percent control of Air India's cheap aviation service Air India Express.

What will be the process? 

After the submission of bids, the sale of Air India will require approval from the Union Cabinet.

History of Air India

Tata Airlines was founded by industrialist JRD Tata in the year 1932. Homi Bharucha, a pilot of Britain's Royal Air Force, was the first pilot of Tata Airlines while JRD Tata was the second pilot. JRD Tata flew from Karachi to Bombay.  

Company name changed after World War II

Air services were stopped during the Second World War. When services were resumed, the name of Tata Airlines was changed to "Air India Limited" on 29 July 1946.

Nationalization of Air India

In 1947, 49 percent of Air India shares was taken by the government. It was nationalized in 1953. To overcome the increasing deficit, the government intends to hand Air India over to private hands by the end of 2021.

According to sources, the Tata group has bid for Air India through AirAsia India and its executives have been visiting airline sites across India in the past few months.

CBDT allows non-payment of TDS on assets transfer

In order to avoid any hindrance in the disinvestment of Air India, the government has announced exemption from tax on transfer of assets on behalf of Air India to SPV Air India Assets Holding Ltd. There will be no TDS and TCS on transfer of assets to SPV Air India prior to disinvestment.

The government formed Air India Assets Holding Limited (AIAHL) in 2019 for the sale of Air India. Air India Group's debt and non-core assets are to be transferred to this entity. Before selling stake in Air India, the national airline is transferring its assets to SPV Air India.

The CBDT said that for the purpose of deducting Tax Collection at Source (TDS), transfer of goods by Air India to AIAHL will not be treated as a 'seller'.

The CBDT said that the transfer of capital assets from Air India to AIAHL under the scheme approved by the central government will not be treated as transfer for the purpose of income tax.