Oil marketing companies and banks may find themselves at a loss as the government tries to reduce Air India’s borrowings before putting up the debt-ridden national carrier for sale. The Civil Aviation Ministry and the Finance Ministry are in the process of meeting banks and oil companies to get haircuts for Air India’s debt, ET Now reported citing unnamed sources in the Civil Aviation Ministry.
According to the report, the two ministries are meeting banks to get haircuts for Air India’s debt and simultaneously are also holding meetings with oil companies to reduce Air India’s dues. the report adds that the government absorbing a part of Air India’s debt is an option to find a good buyer for the beleaguered airline, with the Cabinet to take a final call on the quantum of disinvestment in Air India.
Last week, in an obvious reference to potential difficulties in finding a willing buyer for the debt-laden behemoth, Civil Aviation Minister, Ashok Gajapathi Raju had proclaimed that it might be difficult to find any ‘bakras’ to buy Air India.
“There are hardly any bakras around,” Minister for Civil Aviation Ashok Gajapathi Raju said in an interview to CNBC TV18. “To get one is difficult, and businessmen are businessmen,” he added.
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Last month, Finance Minister, Arun Jaitley confirmed the government’s intent to exit the ailing state-run carrier, in order to lighten the debt load without apparently losing much of the value that it provides to the country’s aviation industry.
“History has given us a second chance that a good investor should come, which has credibility so civil aviation ministry will consider it,” Arun Jaitley said, referring to proposed disinvestment of Air India, in an interview to Doordarshan TV.
Air India, under intense competition from leaner, more efficient and often cheaper private airlines, is reeling with a debt of about Rs 50,000 crore, with about Rs 28,000 crore in working capital debt, and about Rs 4,000 crore in interest burden alone. It has not turned a profit since at least the year 2007.
“To run Air India, you have invested Rs 50,000 crore. That money is government’s money, that’s your money. It could have been used for school education,” Arun Jaitley said during the interview. The carrier has received bailout packages worth about Rs 24,000 crore out of a total Rs 30,000 crore approved but has failed to revive its fortunes amid private airlines continuously gaining market share.