The government is likely to consider selling Air India in such a way that the acquirer does not have to take on its working capital debt, thus halving the burden and making it a more attractive prospect, said people with knowledge of the matter.
The carrier, which the government is again trying to sell after having failed in 2018, will then be left with just Rs 15,000 crore of debt, for loans taken to buy planes.
The proposal, among others, is likely to be discussed at the first meeting of a ministerial group on Air India’s divestment headed by home minister Amit Shah. Other members are finance minister Nirmala Sitharaman, commerce and railways minister Piyush Goyal and civil aviation minister Hardeep Singh Puri.
The government had already transferred Rs 29,400 crore of debt last year to Air India Asset Holdings Ltd, a special purpose vehicle (SPV) that houses debt and assets of the national carrier. It is repaying the debt through government-guaranteed bond issues in three batches. The move halved Air India’s Rs 59,000-crore debt. Of the Rs 30,000 crore remaining, about Rs 15,000 crore is working capital debt.
“The bigger problem with this proposal is managing the optics of the government selling the company without debt,” said a senior government official who did not want to be identified. The government will have to take a call, as any decision to absorb working capital debt may have a political fallout, the person said. But, “reducing debt may ensure more bids for the carrier, which did not get any bids last time.”
The move may draw Indian bidders too. A senior executive at a domestic airline earlier said, “Even with debt reduction to Rs 29,400 crore, there is a lot of debt left with the carrier. It would not make any sense unless this is reduced further.”
Puri recently told reporters he expected more interest in Air India.
