Even after the central bank-approved debt recast plan for Air India (AI), there are doubts within the government on whether the airline can be saved without significant workforce reduction and eventual privatisation.
On Monday, a lenders? consortium led by State Bank of India cleared a plan to convert loans worth R6,500 crore into equity. However, minutes of the group of ministers (GoM) that must clear the recast plan bare fault lines within the government.
Planning Commission deputy chairman Montek Singh Ahluwalia made a strong case for writing off AI?s debt. He said without a write-off and rationalising manpower, it would be tough to implement the restructuring plan. Striking an even harsher note, petroleum minister Jaipal Reddy favoured privatising Air India at some time in the future. ?With its present culture, no proposed change can be implemented,? Reddy is learnt to have said.
The only minister at the GoM headed by finance minister Pranab Mukherjee who favoured the status quo was aviation minister Vayalar Ravi. He suggested giving a ?fair chance? to the suggestions, including injecting government money into AI. He also said in the current environment, privatising AI is not an option and this could be considered only after it starts making profit. ?The group of officers? recommendations must be given a fair chance and acted upon,? he said. He was referring to a turnaround plan cleared by finance ministry special secretary Vilasini Ramachandran that envisages R30,231-crore government support to Air India over 10 years.
Home minister P Chidambaram too expressed doubts over the turnaround plan, saying AI had not achieved any of the milestones set by the GoM and continues to be in a situation where losses have increased despite better performance. Air India is set to post losses of R7,375 crore this fiscal, up from last fiscal?s R6,994 crore.
The bank consortium has demanded freedom for the airline management run it on professional lines ? a euphemism for cutting staff and reworking business plans ? a precondition for the debt recast. Of the total exposure of 28 banks to the airline at Rs 13,000 crore, the Reserve Bank of India has agreed to the proposal to convert Rs 7,000 crore into cumulative redeemable preference shares. But a decision on buying 27 Boeing Dreamliners has been sent back to ministers for approval.
The carrier has a total debt of Rs 46,940 crore including loans and dues it owes to vendors like oil companies and airport operators. It will take 120 days to restructure loans, and once reset, they will run as long-term loans with 2% interest spread to Air India.