News Delhi: The government will soon invite bids to sell its entire stake in Air India , after potential buyers baulked at an initial attempt to divest a partial stake in the national carrier.

“The expression of interest document for Air India will be put out anytime now, at least before the end of this month. The plan is to sell 100% stake in the airline. The proposal needs clearance from a ministerial panel before it is made public," a finance ministry official said on condition of anonymity.

A sale of Air India is key for the Union government to meet its ambitious disinvestment target of ₹1.05 trillion for the year to 31 March. Meeting the target is crucial this year as the government estimates that its corporate tax rate cut will lead to a revenue loss of ₹1.45 trillion.

Debt-laden Air India has been surviving on a ₹30,000-crore government bailout and has ceded market share to private airlines such as IndiGo and SpiceJet.

View Full Image Air India’s net debt swelled from ₹ 55,000 crore at the end of March 2018 to ₹ 58,351.93 crore at the end of March 2019

The ministerial panel to divest Air India, headed by home minister Amit Shah, met for the first time on 19 September to explore all options. The panel also includes finance minister Nirmala Sitharaman, civil aviation minister Hardeep Puri, and railway and trade minister Piyush Goyal. The panel is likely to meet soon to formally clear the privatization process of Air India.

The first attempt at selling a stake in the flag carrier in March 2018 failed to take off as investors were uncomfortable with the government retaining a 24% stake in the airline as well as the requirement to stay invested for at least three years. Also, Air India’s debt of more than ₹33,000 crore that was bundled with the sale deterred investors.

To reduce the debt burden, the government established Air India Assets Holding Ltd (AIAHL) in February, a special purpose vehicle (SPV) to park a part of the airline’s debt not backed by any asset, non-core assets and other non-operational assets of the airline. Only Air India Air Transport, out of the company’s four subsidiaries, has been transferred to AIAHL as of now. The SPV has raised ₹7,000 crore through a bond sale to refinance its debt last month.

Air India’s net debt swelled from about ₹55,000 crore at the end of March 2018 to ₹58,351.93 crore at the end of March 2019. It includes working capital and aircraft-related debt. The sale of Air India, which has about 128 planes, will also let the government exit a loss-making business.

Presently, full foreign ownership is allowed in an Indian airline, although foreign airlines cannot own more than 49% stake in a local carrier.

The environment is now conducive to restart the privatization process of Air India and the failure of Jet Airways (India) Ltd to secure an investor will not affect the disinvestment plan, said Atanu Chakraborty, then secretary of the Department of Investment and Asset Management in an interview in July. Chakraborty is currently the economic affairs secretary. Jet Airways has been grounded since 18 April due to an acute cash crunch.

With a revival of Jet Airways appearing bleak, Air India offers a great opportunity for any company that wants to enter the full service carrier business in India, said Dhiraj Mathur, an aviation expert and former partner at PwC India.

“It is an attractive asset but the issue is how many will have the deep pockets to take Air India since the present rules don’t permit 100% ownership by foreign airlines. The government may have to review that policy. The other two issues are related to employees and liabilities, a lot of which the government has restructured and put into an SPV. If those can be addressed, it’s a great asset," he added.

Gireesh Chandra Prasad contributed to this story.

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