NEW DELHI: When the government decided to sell its stake in Air India, it was not clear if it should completely exit the national carrier or remain a shareholder.
It opted to retain some stake and the results were disastrous as the government failed to get any response. What it, however, did was make it clear to the Centre that private players may not be interested in buying a public sector company if the government retained a stake and had its nominees on the board.
Learning from the aborted AI transaction, the government decided to not just completely exit the airline but also use the model for other PSUs on the privatisation list, be it Bharat Petroleum or Shipping Corporation.
But AI’s privatisation — in the pipeline for nearly two years — is also expected to set the template for the government’s other disinvestment projects. For instance, even before the privatisation process for AI started, the government was clear that it did not want to give away land and real estate along with the company. So, these assets were hived off into a separate company.
A similar strategy is being followed for other state-run companies. Further, the airline has been one of the biggest beneficiaries of government guarantees and it’s an issue that has resulted in several rounds of discussions between the finance ministry, department of investment and public asset management (Dipam), the ministry of civil aviation and EY, the transaction adviser. Some of the guarantees were critical for AI to borrow from the market to buy aircraft and raise funds later, especially given its precarious financial position.
Then, there was the trickier issue of how to deal with employee benefits post-disinvestment. The government has opted for a simple formula — pay the benefits till privatisation, be it pension or medical facilities. In fact, the civil aviation ministry has already written to the airline management to start the separation process for PF. Separately, it has been tasked with working out the medical benefits for employees.
