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Almost seven decades after ceding control of the airline, the Tata group on Thursday regained Air India. Last year, the group had emerged as the winning bidder for the airline, with a bid of Rs 18,000 crore. With this acquisition, the Tatas will gain 100 per cent ownership in Air India, Air India Express, and a 50 per cent stake in the ground handling firm AI-SATS. This sale marks the first major outright privatisation of a public sector entity in recent years. Though there has been criticism of the pace and manner of the government’s privatisation programme, the symbolism of this sale is hard to ignore.
The Tatas will now face the arduous task of turning around the airline. This will be challenging, more so at a time when the aviation industry is grappling with the fallout from the pandemic. It will also have to deal with a plethora of legacy issues, ranging from an ageing fleet to human resources. According to the bidding conditions, the Tatas will have to retain all employees for a one-year period. The group must also contend with claims on international assets of Air India by Devas Multimedia and its investors who are trying to enforce its arbitration awards. Reportedly, Air India is seeking an end to the case on grounds that the ownership change prevents any claims of recovery of arbitration awards. Then there is the issue of the group’s other competing airlines — Vistara and AirAsia India — to contend with. It is possible that the Tatas will at some point consider integrating their aviation ventures under a single entity.
Though this is a milestone, by itself, it does little to shore up the government’s disinvestment proceeds. Of the Rs 18,000 crore winning bid, only Rs 2,700 crore is to be paid to the government, while the group will retain the balance, Rs 15,300 crore, in the form of debt. Data from DIPAM shows that the government’s proceeds from disinvestment remain well short of the target — as against a target of Rs 1.75 lakh crore, collections till now had been only Rs 9,330 crore. On its part, the government is hopeful of the LIC IPO culminating by the end of March, though, considering the intricacies of such a transaction, it is not clear if it can be concluded by then. Similarly, the privatisation process of BPCL as well as that of the public sector banks is also expected to spill over into the next year.
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