Sept 11 failed us to rope in new partner, says letter to ministry

Tatas give up on Air-India

Ravi Kapoor

New Delhi, Dec 6: The Tatas have decided to give up their bid to take over Air-India, bringing divestment in the aviation sector to a grinding halt.

In their letter to the disinvestment ministry, the Tatas have said they have been unsuccessful in bringing together a consortium, and cited the ongoing “slowdown in the aviation industry” following the September 11 attacks on the US, as the main reason. The ministry received the letter on Thursday.

According to industry sources, the Tata group has informed the divestment ministry that it has been “actively evaluating various options to bring together another consortium” after the withdrawal of Singapore International Airline (SIA) in September this year. SIA was in the consortium with the Tatas for taking over the national carrier.
“However, no global aviation major has evinced any serious interest in a partnership in such a consortium in the aftermath of the September 11 attackson the New York World Trade Center and the resultant slowdown in the aviation industry,” the Tatas have informed the ministry.

With the Tatas pulling out of the race, the privatisation process in the aviation sector has come to a screeching halt. It can be recalled that both for the A-I and Indian Airlines, the ministry had shortlisted two bidders each, and one in each case was the Hinduja group.
However, when the government formulated and notified guidelines barring tainted companies from bidding for public sector undertakings in June this year, the Hindujas were dropped. This left one bidder for each of the aviation PSU, the Tata-SIA consortium for the national carrier and Videocon for the domestic carrier.

Moreover, these guidelines also created problems for Videocon which was issued show cause notices by the ministry in the wake of their indictment by the Securities & Exchanges Board. Later Videocon withdrew on its own, ending the privatisation process of the domestic carrier.

In August this year, SIA also withdrew from the Tata group-led consortium, saying it did not want to get mired in the political controversy surrounding the privatisation of A-I.

After SIA’s withdrawal, the Tatas sought time from the ministry to rope in another partner/s. And the Tatas’ letter to the ministry virtually draws curtains on privatisation of A-I.

The government plans to sell 40 per cent of its equity in A-I to a strategic partner. Out of this, the foreign partner can hold up to 26 per cent. As per the bid of the Tata-SIA consortium, SIA had indicated to take up 19 per cent and the Tatas 21 per cent in A-I.

Disinvestment minister Arun Shourie was not available for comments on the latest development on the A-I selloff front. Earlier, however, he had warned that the “avalanche” of allegations against potential buyers of public sector units were scaring them away. “A factor that seems to be scaring away bidders is the din, and the avalanche of allegations that descend on parties once it is known that they are in the race for a PSU,” he had told the Rajya Sabha during the Monsoon session.