The Finance Ministry is preparing a fresh proposal for sale of Air India, incorporating issues like crude oil prices and exchange rate volatility, flagged by EY last year on possible reasons of the government failing to attract bidders for the national carrier. The proposal, which will be placed before the Air India Specific Alternative Mechanism (AISAM), will also include option of selling either 100 per cent or 76 per cent government stake in Air India.
The AISAM is a group of ministers, and currently has to be reconstituted as Arun Jaitley and Suresh Prabhu are not part of the new government. They will be replaced by Finance Minister Nirmala Sitharaman and Civil Aviation Minister Hardeep Singh Puri. Transport Minister Nitin Gadkari is likely to continue in the panel when it is reconstituted.
Last year, the government invited bids to sell 76 per cent in Air India, along with transfer of management control. However, it did not attract any bidder. After the transaction advisor EY prepared a report citing probable reasons that led to failure of the sale process.
The reasons cited include 24 per cent government stake and corresponding rights, high debt, volatile crude oil prices, fluctuations in exchange rate, changes in macro environment, profitability track record of bidders and restriction on bidding by individuals. An official said that the EY report was discussed at the AISAM meeting in June last year, following which it was decided that the Air India sale should be deferred.
It was also decided during the meeting that more funds will be infused into the carrier and steps will be taken to lower debt of Air India by selling its subsidiaries and non-core asset. An official said, "We will present a fresh proposal for Air India sale to AISAM. It would include updates on the issues raised when Air India disinvestment failed last year. It would be left to the AISAM to decide whether the government should go in for 100% or 76% stake sale."
Once updated accounts are available and AISAM gives a go-ahead for Air India sale, the Department of Investment and Public Asset Management (DIPAM) and Ministry of Civil Aviation will draft the Preliminary Information Memorandum (PIM) giving details of about the company and stipulating conditions for eligibility of bidders.