Praful Patel denies Air India strategic investor talk

Is the ministry of civil aviation on a backfoot over the proposal to bring in a strategic investor for Air India? Minister Praful Patel, on Tuesday, denied the existence of any such proposal.

But senior ministry officials said that the proposal, which was being discussed and deliberated upon till recently, will now have to pass muster with the newly ‘professionalised’ board of directors of the airline.

“It (strategic investor) is one of the options we have discussed within the ministry and with the CMD earlier…..but now, let the airline come up with this proposal itself. We have professionals on the board, new committees for Strategy and Finance have been constituted, reporting to chairman and MD, Arvind Jadhav and they will take this call,” the officials said.

Another said that bringing in a strategic investor is like “selling the family jewels”.

Already, this proposal has generated stiff opposition within some sections of the government.

So what other route is available for the airline to remain viable? Air India has been seeking a hefty dole from the government to survive, but the latter has based any further funds’ infusion on a concrete revival plan.

While denying any plans on inviting an investor, Patel pointed towards improving health of the ailing national carrier, asserting that its losses have reduced by a fourth (or 25%) to Rs 300 crore a month.

Is this an indication that he is looking to present an improved performance of the airline alongside a demand for further cash infusion?

It is estimated that the government will have to pump in about Rs 5,000 crore annually for the next few years to keep AI alive, if the strategic investor idea is junked.

This is not the first time that the option of providing government funds to the airline will be considered. Earlier, Air India had approached the government seeking a one-time equity support of Rs 10,000 crore for repayment of the aircraft principal.

The airline had also sought a Rs 10,000-crore interest-free, 10-year loan with a five-year moratorium to support working capital reduction.

Eventually, the cabinet decided to make available Rs 800 crore, which the airline recently received, and took its paid-up capital to Rs 945 crore.

The government has also indicated that another Rs 1,200 crore will be made available to the airline soon.