It was the finance ministry which mooted the idea of finding a partner first before going for a fleet expansion and the civil aviation ministry brass, by all indications, is supportive of the view.

Reacting to a cabinet note circulated by the ministry of civil aviation, North Block said that all issues pertaining to expansion of fleet should be decided only after a strategic partner had been incorporated into Air India.

In other words, the finance ministry has reversed the order of the so-called restructuring package for the airline. The Disinvestment Commission had suggested that a 40 per cent divestment to a strategic partner should follow a Rs 1,000 crore injection by the finance ministry forpurchase of new aircraft.

Besides offloading 40 per cent, the commission had recommended that another 10 per cent should be divested in favour of domestic institutional investors and 10 per cent to domestic retail investors and employees, taking the total divestment upto 60 per cent. The aviation ministry, in the cabinet note, supported the package drawn up by the commission. Speaking to The Financial Express, civil aviation secretary PV Jayakrishna admitted that the finance ministry had called for a reversal of the order of restructuring. "These views had been communicated to Air India," he said.

Though the secretary stressed that no formal decision had been taken on North Block views, he said, "It is only logical that a new partner should also be involved in the decision making process (regarding fleet expansion)". He went on to add, "When the other promoter comes in there is no guarantee that he will buy only 12 or six aircraft, he may want more or less."

Clearly, the brass in the aviationministry seems to be in subscription to the views expressed by the finance ministry. "The new partner must be have a say on whether Air India should go for long haul or short haul aircraft. We have instructions to put the entire Rs 1000 crore infusion on hold," a finance ministry official said.

Though the finance ministry's views have been communicated to Air India by the civil aviation secretary, it is not known yet whether the company will apply the brakes on its aggressive acquisition programme. In the cabinet note, Air India had propossed buying 13 aircraft at a staggering cost of Rs 6000 crore. The Rs 1000 crore infusion by the finance ministry was expected to be staggered over a period of four years. The note also stressed full divestment of Hotel Corporation of India, a subsidiary of Air India.

According to reports, there had been intense internal debate within Air India on whether it should go for medium capacity long range (MCLR) or small capacity long range (MCLR) aircraft. These reports alsoclaimed that Air India was on the verge of floating international tenders for purchase of aircraft.

With North Block, and possibly the civil aviation ministry, taking an entirely different stance from that of Air India, it not clear yet whether Air India will continue to pursue its aggressive acquisition plans or wait for incorporation of a new partner.