June 30, 2017

Cabinet approves privatisation of the national carrier Air India.

by Prince Chandran

India’s cabinet on Wednesday has approved the debt-laden national carrier Air India to be privatised. The airline has been struggling to grow profitable amid growing competition from low -cost rivals. Finance Minister Arun Jaitely said the government had given the “in-principle” approval for stake sale.

The cabinet also approved formation of a committee headed by FM Arun Jaitely to decide on the details, including the size of government’s stake to be sold.

“The cabinet today gave an in-principle approval to a proposal by the aviation ministry, which was to divest stake in Air India. The aviation ministry’s recommendation that a group be formed under the chairmanship of the finance minister has also been approved,” Jaitley said after the cabinet meeting. “The group will discuss and decide on the modalities on debt, assets like hotel companies and all other assets of Air India.”

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The government will also let the committee decide whether India will write off all or part of Air India’s ₹ 52000 crore ($ 8 billion) debt.

As per industry analysts, the airline will perform better if it was completely out of government’s control. “Air India would perform better if it is removed from the clutches of the government completely,” said Jitendra Bhargava, former executive director at the carrier.

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