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No Takers For Air India Stake Sale. Here's Why it Crashed Before Takeoff

The Air India disinvestment process began on March 28 this year and has been billed as the largest strategic disinvestment in independent India.

Sindhu Bhattacharya |

Updated:June 1, 2018, 4:01 PM IST

The Narendra Modi government’s bold plan to sell Air India to private parties has suffered a major setback as the deadline for putting in bids expired on Thursday evening without even a single suitor coming forward.

Industry had been abuzz with theories about a large business conglomerate and a domestic airline being interested, but in the end, this remained mere speculation. With not even a single bid, the government may have to restart the entire process with easier terms and conditions.

What happens now that not a single bid has been received for the government’s stake in Air India? Will the Air India disinvestment plan be scrapped? There could be a rebid. This means the entire process gets repeated, with perhaps fresh terms and conditions.

In the recent case of the government inviting bids from private developers for Ahmedabad and Jaipur airports too, it was forced to prepare for a rebid, since only a single bidder came forward and the entire process had to be scrapped for a fresh start. Will the same happen in the case of Air India, where potential bidders have already aired their apprehensions regarding the terms of the sale?

One source close to the developments said that interested parties are waiting for the government to ease the bid conditions and the disinvestment timeline. This person also referred to the recent statements from senior government officials warning of no sale if no “adequate” price received, saying the government may be preparing a ground to either scrap the entire process of disinvestment or start over, with major changes.

But eventually what happens from here on with regards to Air India will finally be decided by four of Modi’s trusted ministers - Arun Jaitley, Suresh Prabhu, Nitin Gadkari and Piyush Goyal. The quartet forms a group called Air India Specific Alternate Mechanism (AISAM), which will take a call on the future of the disinvestment process.

It may decide to continue as earlier, scrap the process or call for a rebid. Obviously then, the future course of action on Air India may be an entirely political call.

The disinvestment of AI never really got off to a flying start. First, it was tepid response from potential bidders, with a prominent airline even walking out of the entire game early on. Next, remaining bidders began clamoring for tweaking bid conditions, objecting to many of the basic premises which form the Expression of Interest (EoI) document.

There has been widespread skepticism about government’s toehold, since it proposes to retain 24% stake even after the disinvestment process has been completed. The bidders’ complaints were followed by a veiled threat by the powerful Sangh lobby against selling off Air India to foreigners.

The Air India disinvestment process began on March 28 this year and has been billed as the largest strategic disinvestment in independent India. Government proposes to offload 76% stake in Air India and its low cost international arm Air India Express, besides all of its 50% stake in ground handling joint venture AISATS.

Any prospective bidder would want some of these sops: complete control with government relinquishing its 24% stake too, lower debt liability and clarity on manpower issues post disinvestment. Not just confused bidders, the government is also facing internal opposition.

Subramanian Swamy has already used the word ‘scam’ when referring to AI disinvestment, the Swadeshi Jagran Manch is preparing a roadmap for the airline to continue with government ownership and employee unions are opposed to the sale.

Remember, a non-airline company, with no experience in running an airline, can also place a bid for AI. This, more than anything else, shows all that is wrong with the AI sale and is a possible pointer to why the sale may eventually get stymied all together.

The author is a senior journalist. Views are personal.

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