It is fast dawning on the Vajpayee government, which till the recent Lok Sabha elections was confident over disinvestment of Air India (AI) in the current fiscal, that a considerable dose of Government equity is required to spruce-up its balance sheet before going ahead with disinvestment.

With the government running behind the disinvestment target and revenue collections showing a dip, the finance ministry is unlikely to agree to fresh equity infusion of Rs 1000 crore in AI in the current fiscal.

Finance minister Yashwant Sinha has already announced the name of Indian Petrochemicals Limited (IPCL) for disinvestment while the names of two other state-run companies are awaited. Sinha has made it clear that he expects the PSU disinvestment to mop-up funds to meet the fiscal deficit. The two cash-strapped national airlines put together need equity infusion of Rs 1,450 crore before they are ready for disinvestment.The Disinvestment Commission has recommended a Government dole of Rs 1000 crore in equity to Air India and the Kelkar committee report on Indian Airlines has suggested that a sum of Rs 450 crore be pumped into the airline.The funds are needed to spruce-up the balance sheet, correct the debt-equity ratio in the airlines and wipe out accumulated losses to a great extent.

It is now becoming clear that the Government is not in a position to make these funds available. "The disinvestment in Air India is a complex task as a lot of spadework is necessary. The Disinvestment Commission has told the Government to invest Rs 1000 crore in the airline. The money has to be found," Chaman Lal Gupta, minister of state for civil aviation, told The Financial Express. Top bureaucats in the civil avaition ministry also feel that the national airlines' privatisation may not be an easy task, or a quick one. "The national airlines represent national ego, they cannot be gifted away to investors" said a top official. A line of thought finding favour for the Air India disinvestment is that the Government can go in for a sale of small amount of its equity to a strategic partner as a first step. The Disinvestment Commission had recommended the sale to strategic partner as a second step after the initial move of Government equity addition. For Indian Airlines, the Government wants to wait for thefinancial results for the current fiscal. IA is targetting profits for the third year in a row. If the profits continue, it may be considered for disinvestment in 2001-02.