Ending months of wrangling between the civil aviation and disinvestment ministries, the government on Friday announced its decision to privatise Air-India (A-I) by hiving off 60 per cent of its equity, of which up to 26 per cent would be offered to a foreign strategic partner including a foreign airline. With this, the management control in the airline would be vested in the strategic partner, whose stake has been capped at 40 per cent.
Briefing reporters after the meeting of the cabinet committee on divestment, the divestment minister Arun Jaitley said that under the divestment proposal of A-I, 40 per cent would be retained by the government; 40 per cent would be offered to strategic investors; up to 10 per cent of the shares to be offered to its employees as ESOPs while the balance 10 per cent would be offered to domestic financial institutions and Indian investors. In other words, of the 100 per cent in Air-India, a minimum of 74 per cent at any given time will be Indian holding.
However, this goes against the earlier proposal of the civil aviation ministry that 75 per cent of the AI equity has to be retained under Indian control while the balance 25 per cent would be offered to foreign bidders including airline companies as the strategic partner.
On the issue of management control Jaitley said that the strategic partner who would be investing the airline would offered management control.
Incidentally, it was the issue of management control being offered to the strategic partner, which was a major bone of contention between the divestment department and the civil aviation ministry.
The minister also explained that if a foreign airline were to pick up a stakes in A-I it would have to do so through a joint venture. In the JV, the foreign airline can have a maximum of 26 per cent stake, the balance of 14 per cent would reside with the Indian partner. However, if an Indian corporate was to take over the airline they would be entitled to hold the full 40 per cent stake in the air carrier.
According to officials, with this, the entire divestment process would receive a big boost. Jaitley also informed that the government had decided to appoint a global advisor who would advice the committee on the detailed management plan for the divestment of government stake in A-I.
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