"I have held several rounds of discussions on drafting a civil aviationpolicy. The minister of state, secretary, managing directors of Air Indiaand Indian Airlines, have all been involved in the discussions" the ministertold The Financial Express in an exclusive interview.

Yadav said that the new civil aviation policy will address long-pendingissues of disinvestment in the state-owned Air India and Indian Airlines."We expect to finalise the policy in another two or three weeks" added Yadav.The Vajpayee-led Government has sent out signals that fresh equity funds forpropping AI and IA may not be forthcoming in the current fiscal. The Centreplans to use the funds from disinvetsment to meet its fiscal target in1999-2000.

The two airlines, however, need a total of Rs 1425 crore in equity additionbefore they are ready for disinvesment. A Rs 1000 crore package isrecommended for Air India while Indian Airlines needs funds to the tune ofRs 425 crore. The funds are to be used by the airlines to improve theirbalance sheets besides enabling them to purchase new aircrafts.

The Government is believed to be exploring the idea of inviting a strategicpartner to assist Air India in its financial turn-around. AI has alreadyconducted an asset evaluation exercise which has pegged its asset value atRs 12,000 crore.

For IA, the plans may be to wait and watch the airline's performance forthis fiscal before opting for an initial public offer (IPO) in the year2000-01. Government support for national airlines preceeding a privatisationmove is a common occurrence the world over. State monetary assistance helpsairlines to wipe-off accumulated losses, making them attractive to privateinvestors.

Interestingly, the civil aviation sector in India has witnessed severaldisjointed attempts at policy formulation earlier.

In 1998, the Union cabinet of the Deve Gowda-led Government passed a civilaviation policy barring foreign entities from holding equity stake indomestic airlines. A few months later, the wording of the policy was changedto include all direct and non-direct forms of foreign control in domesticairline sector.

However, this policy failed to address key issues such as funding for thiscapital intensive sector, plus ridding the state-owned airlines of theirsocial responsibilities etc.

Earlier, a major policy change in the civil aviation sector was ushered inby the Open Skies policy of the Narasimha Rao Government which opened doorsfor private operators in domestic aviation in 1992.