1. Air India privatisation push: Arun Jaitley led panel wants Centre to take over Rs 20,000 cr debt load

Air India privatisation push: Arun Jaitley led panel wants Centre to take over Rs 20,000 cr debt load

The government, which had drawn up a plan for strategic sales in 20-odd PSUs including profitable ones such as Bharat Earth Movers (BEML), is now ready to jump-start the process.

By: | New Delhi | Updated: August 30, 2017 7:03 AM
air india, privatisation in air india, air india news, Bharat Earth Movers The national carrier is heavily leveraged with borrowings of close to Rs 44,000 crore, a potential deal-breaker. (PTI)

A panel of ministers led by finance minister Arun Jaitley may recommend the government take over Rs 20,000 crore of Air India’s working capital debt on its books so as to speed up the privatisation process. The national carrier is heavily leveraged with borrowings of close to Rs 44,000 crore, a potential deal-breaker. In FY16 Air India reported a net loss of Rs 3,643 crore.

To make the transaction more palatable to a prospective buyer, some Rs 20,000 crore could be taken off the books of the airline and put on the government’s balance sheet. Banks could subscribe to bonds issued by the government, officials in the ministry of civil aviation explained. That would spare lenders from taking a haircut,though it is possible the bonds would not carry a coupon. Nevertheless, since the bonds would have a sovereign status, they would be risk-free.

Aviation ministry officials believe this is one way to convince a prospective buyer to take over the bleeding carrier, which burns through Rs 200 crore a month and which the government is keen to privatise. Even after this, any potential acquirer would need to take on Rs 10,000 crore of working capital- and Rs 14,000 crore of aircraft-related debt.

The national carrier is expected to report an operating profit of close to Rs 300 crore for FY17, up from Rs 105 crore in 2015-16.

A senior official in the aviation ministry told FE that the proposal had been discussed at the last group of ministers (GoM) meeting. “This is one of the proposal made by the committee of secretaries,” he said.

The GoM is yet to decide on how dues worth Rs 8,000 crore that Air India owes to oil companies and Airports Authority of India will be cleared. Over the years, Air India has piled up a colossal debt of around Rs 44,000 crore; there has been little effort to pare this debt as expenses on wages and salaries have risen consistently from Rs 3,224.5 crore in FY08 to Rs 3,751.4 crore in FY11; in FY15, the wage bill was Rs 2,466.6 crore, according to the airline’s the annual report.

Meanwhile, the department of investment and public asset management along with the aviation ministry is shortlisting bankers to handle the privatisation. Air India’s fleet comprises 43 Airbus narrow-bodied aircraft and four Boeing 747 aircraft; the remaining aircraft are on lease. Officials associated with the divestment process feel a potential buyer would not be averse to taking on the aircraft-related debt since the planes are all in good condition.

While InterGlobe Aviation, which runs IndiGo, had made a tentative offer to buy Air India’s international operations — which contribute close to 60% of profits — the government has not received a firm offer from any other party. Aviation ministry officials said it was unlikely the carrier would be sold in parts. Most of the lucrative assets of the airline — wide-bodied aircraft and prime slots at international airports — are attached to the overseas operations.
Shortage of manpower throws railways safety off track

“Similarly, the newly created assets have not been provided with suitable manpower to maintain them,” the letter added.

The railways did an internal analysis in January 2017 which showed that for new lines that were laid in the past five years, there was a requirement of roughly 7,500 additional trackmen of which only 3,600 were sanctioned and just 2,000 trackmen were actually appointed, according to another railway official.

Taking cognizance of situation, the newly appointed chairman of the Railway Board Ashwani Lohani — who took over after AK Mital resigned from the post following the derailments of the Utkal Express and Kaifiyat Express — held his first meeting with officers related to track safety. In the meeting Lohani asked to immediately fill up all vacancies, especially that of trackmen, and also asked to focus on their living conditions. Lohani, according to the second railway official quoted above, also asked officials to come up with new test criteria for the recruitment of trackmen wherein focus should be given on physical test.

Later, in a letter addressed to 1.3 million employees of the railways, Lohani wrote: “Safety shall always remain our principal focus area. We have to always be on our guard to ensure the highest level of safety in train operations and instil a renewed sense of confidence in our esteemed passengers.”

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