ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Roadblocks to Disinvestment

Disinvestment is taking wing finally – that is the impression that the high profile decision to privatise Air India should have created. However, the ambiguities surrounding the decision to disinvest in Air India reflect the absence of a coherent policy and continuing arbitrariness in the government’s approach to privatisation.

The government has offered to shed 60 per cent of Air India’s equity, keeping for itself just 40 per cent. It will allow a strategic partner to take up 40 per cent, of which 26 per cent can be given to a foreign airline if the strategic partner does not have, on its own, the expertise to turn the airline around. The government will offer 10 per cent of the equity to the airline’s employees as stock options and another chunk of 10 per cent to domestic investors (read financial institutions). This, of course, is more liberal than the divestment pattern that has been finalised for Indian Airlines. The government proposes to offload 26 per cent of Indian Airlines to a strategic partner and 25 per cent to financial institutions and keep the rest with itself. Yet, it is far from certain that the government would find takers for Air India, even with attractions such as the booming Indian market for aviation as a result of India’s closer integration into the world economy and the unused rights to operate flights on international routes negotiated for the airline by the government of India on a bilateral basis with other governments.

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