As a precursor to the sale of Air India, the Cabinet Thursday approved setting up of a special purpose vehicle -- Air India Assets Holding-- to transfer Rs 29,464 crore worth loans of the national carrier and its four subsidiaries.
"The Union Cabinet has given ex-post facto approval for the creation of the SPV and associated activities for the disinvestment of Air India and its subsidiaries or JV," an official statement said.
The four subsidiaries which have been transferred to the SPV are Air India Air Transport Services (AIATSL), Airline Allied Services (AASL), Air India Engineering Services Ltd (AIESL) and Hotel Corporation of India (HCI).Also, non-core assets - painting and artefacts - as well as other non-operational assets of the national carrier too will be transferred to the SPV.
These subsidiaries and assets are not part of the Air India strategic disinvestment, which is being planned by the government.
The Ministry of Civil Aviation had issued an order for creation of a new SPV, which was incorporated on January 22. "The board of the SPV includes Air India CMD, Joint Secretary in the Civil Aviation Ministry, Expenditure department, Department of Economic Affairs, Department of Investment and Public Asset Management (DIPAM) and Air India Director (Finance)," the statement said.
As on date, one subsidiary AIATSL has been transferred to AIAHL. The government has initiated the process of the strategic sale of AIATSL on February 12 and the last date for submission of Expression of Interest is March 26.
"The Government has decided to transfer following to the newly created SPV -- Debt of Air India amounting to Rs 29,464 crore, subsidiaries which are not part of the AI strategic disinvestment and non-core assets, painting and artefacts and other non-operatonal assets of Air India," the statement added.
The move is a precursor to the strategic disinvestment of Air India as it would help in selling some of its subsidiaries and monetise assets.
Air India has a debt burden of Rs 55,000 crore. In November last year, a ministerial panel headed by Finance Minister Arun Jaitley had approved transferring Rs 29,000 crore debt to the SPV -- Air India Asset Holding Company.
After a botched attempt to sell Air India in May last year, the Jaitley-led panel in June decided to scrap the stake sale plan for the time being. It was decided to infuse more funds into the carrier and cut down debt by raising resources by selling land assets and other subsidiaries.
The government had initially planned to offload 76 per cent equity share capital of the national carrier as well as transfer the management control to private players. The buyer was required to take over Rs 24,000 crore debt of the carrier along with over Rs 8,000 crore of liabilities.However, the stake sale failed to attract any bidders when the bidding process completed on May 31.