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Government should divest 100% stake in Air India: CAPA India

Author: IANS/Tuesday, June 5, 2018/Categories: Aviation

Government should divest 100% stake in Air India: CAPA India

New Delhi - The Central government should divest 100% stake in the national passenger carrier Air India, said aviation consulting firm CAPA India.

“... the government should divest 100 per cent even if it means giving up future upside, because if retaining a stake is blocking the entire sale, it is saddling the government with billions of dollars of red ink," CAPA India said in a report.

"Far better to cut losses now and maximise proceeds today, especially as there is no certainty as to where the airline business cycle will be tomorrow. And a stronger, restructured Air India can deliver significant indirect benefits to the Indian economy by stimulating tourism, trade and job creation, that far outweigh any notional future upside on the sale of 24 per cent equity in the airline in the future."

According to the aviation consulting firm, continuing under government ownership will lead either to an "indefinite drain on the exchequer or to the closure of the airline at a great cost to employees, taxpayers, and to the economy".

"CAPA therefore supports the divestment process and urges the Government of India to put aside this setback and push ahead with the target of concluding the transaction before the end of FY2019, after taking on board investor feedback to structure a more realistic offer," said the report, which came just a few days after the Central government said that it did not receive any bids for the cash-strapped airline. 

Last Thursday, the Civil Aviation Ministry said that "no response" was received till 5 p.m. on May 31 which was the extended submission deadline for the 'Expression of Interest' (EOI) bids under AI's divestment process and "Further course of action will be decided appropriately."

The government on May 1 had released a detailed document on clarifications sought by interested bidders regarding the divestment process, including plans to retain 24 per cent stake in the divested entity, provision of ESOPs (employee stock ownership plan) and on the total debt and liabilities which are expected to remain with AI.

On March 28, the government had issued a Preliminary Information Memorandum inviting 'EOIs' for the airline's strategic divestment, along with its shares in AIXL and AISATS (Air India SATS Airport Services) from private entities including the airline's employees.

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