In a recent turn of events, the Union Cabinet and PM Narendra Modi together allowed permission to Non-Resident Indian’s to acquire a 100% stake in Air India. Air India has been on the debt-ridden condition for the past few years, and the Government of India tried to take up a few measures to settle the debts without any positive results until now.
The privatization of Air India was first approved by the Government in June 2017. And in March 2018, 79% stakes of Air India along with Air India Express and 50% stakes of AISATS was put out for sale. By this time, Air India was drowning under a debt of ₹33,392 crores (US$4.7 billion), and the buyer was bound to inherit the debt as well which eventually met with an evident dead end.
After failing in the very first attempt of sale, Air India was on the brink of shutting down. Amidst shutting down worries, Air India was in a knee-deep debt of 90,000 crores which made the second deal all the more important to keep the flight services running.
With a potentially interesting second offer, the Indian Government raised the stakes high by allowing 100% stakes of Air Indian and Air India Express, and 50% stakes of AISATS to even NRI bidders having Indian citizenship.
The FDI policy is thought to attract new bidders, and few are already interested, showing some hope. The revised FDI norms also state that though it will be owned completely by NRIs, the airline will be deemed with Indians through SOEC, will have its right to fly abroad to international airports with Maharaja’s slots.
The SOEC norms previously restricted NRI’s from acquiring more 49% stake of Air India, as the majority of 51% control was supposed to be with only Indians. The changes paved by the Modi Government made it possible for NRIs to acquire 100% of stakes with Air India.
Bidders will be expected to take on a debt-cum-liability amounting to ₹32,447 crores. However, for the current value of 146 aircraft, they will get ₹88,781 crores, out of which the Government will be keeping a sum of ₹56,334 crores.
Two London-based NRI business houses and TATA Group have shown some interest in the matter, and all of the potential bidders are requested to submit their expression of interest within 17th March 2020, and the names of successful bidders are scheduled to be announced by March 31, which can also change if required.
This decision gains more value due to Air India being the only carrier providing, crew, widebody aircraft with medium and long haul, flying rights and slots at the airports in places such as Africa, Australia, Europe, Far East, and North America. With Jet Airways downing its shutters in last year’s April, all eyes are on Air India.