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Saturday, Mar 16, 2002

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Options to sweeten AI, IA sell-off

Ashwini Phadnis

NEW DELHI, March 15

IN an effort to give a push to the disinvestment of Air India and Indian Airlines, the Government is to consider several options including a one-time write-off to wipe off the huge losses suffered by IA in the past two years.

Another option is to take a relook at the report of the Disinvestment Commission on the two airlines. The report, submitted to the Government over three years ago, had called for providing Rs 1,000 crore as equity to AI for financial restructuring.

These options were thrown up here today during a luncheon meeting between the newly appointed Civil Aviation Secretary, Mr K. Roy Paul, and the Secretary of Disinvestment, Mr Pradip Baijal.

"Though the discussion was of a general nature, several ideas on what needs to be done to sweeten the disinvestment deal so that the interest of the bidders does not wane were thrown up. After all, we cannot have another failure the next time we decide to approach the market,'' sources told Business Line.

On the issue of IA disinvestment, one line of thinking was to follow the Jessop route for disinvestment. In the recent past the Government had adopted a restructuring scheme for the company which included writing off/waiver of Government loans and interest and infusion of fresh funds.

Sources maintained that the meeting had been called as the Government has already announced, though not yet enacted, several new changes which could have a positive impact on the disinvestment of the airline industry.

For the domestic sector airlines, the Government is said to be close to finalising a proposal to permit a higher foreign direct investment (FDI) of 49 per cent and also allow foreign airlines to participate in the setting up of and management of domestic airlines. Foreign airlines were not allowed to participate in the disinvestment of IA earlier.

Besides, the issue of disinvestment of the AI subsidiary, Hotel Corporation of India (HCI) was also discussed.

Sources said that apart from the flow of funds from the two HCI hotels property in Mumbai, it was also felt that discussion should be initiated with the Jammu and Kashmir Government for disinvestment of the Srinagar Centaur hotel.

The issue of timing for disinvesting the stake in the Government entities were also discussed.

Sources said that there was a feeling that this may not be an appropriate time to enter the market.

They mentioned the presentation made by the Chief of the Paris Airport at the Ministry of Civil Aviation a few days back where he mentioned that this year the airport is likely to report earnings at the same level as 2002.

"The airport is likely to be in the black sometime in 2003-04 which may make it difficult for us to decide on what future course of action to take,'' sources said.

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