The government will invite fresh expression of interest to divest its entire stake in helicopter service provider Pawan Hans, ending another unsuccessful attempt at selling it.
"There were some issues..we will invite EOI," a senior government official said.
The Narendra Modi government, in its second term, floated an expression of interest on July 11 for 51 percent stake. It was reiterated that ONGC will also sell its 49 percent to the successful bidder.
The deadline for submission of bids was extended three times despite several sweeteners in this round.
CNBC-TV18 had exclusively reported on November 20 that the latest divestment cycle of Pawan Hans has hit a bottleneck and the situation is worrisome because the helicopter company's financials have taken a turn for the worse, especially since the last financial year. In 2018-19 (Apr-Mar), the company posted a net loss of Rs 72 crore and it is already making losses in the current year.
"In the period between April and October, the losses are around Rs 80 crore. At this rate, the losses for the entire financial year could very well exceed Rs 100 crore," a person aware of the development had told CNBC-TV18 on the condition of anonymity. The losses are on account of under-utilisation of its fleet of 43 helicopters. Several of them are very old, some touching the age of 30 years, and hence, are out of service for want of maintenance, the source had added. The drop in revenue from operations from FY 16 onwards can be attributed to lower flying hours due to a reduction in operational fleet caused by 3 accidents during 2015.
Revenue has further declined in FY 19 due to the vintage life of helicopters as vintage clauses enforced by various customers act as a hurdle to participate and win new businesses, Pawan Hans had said in its preliminary information memorandum published on July 11.
Due to the accidents of its helicopters, the insurance cost has also risen for Pawan Hans to Rs 33 crore as per provisional figures for 2018-19 as compared to Rs 18.5 crore in 2017-18.
The divestment of Pawan Hans has been an uphill task for the government since 2017. In October 2017, the government invited bids for 51 percent stake in the company but could not find any suitable takers even after extending the deadline once. At that time, it was not clear whether ONGC, which owns 49 percent in Pawan Hans, will also exit the company or not.
The EOI was soon withdrawn due to a weak response.
In April 2018, the government again invited bids for 51 percent stake in Pawan Hans but soon after, in July, the ONGC board passed a resolution that it will also exit Pawan Hans. As a result, the government floated a fresh preliminary information memorandum in October 2018 and invited bids.
This bid process was not successful as the single bid received was unacceptable. With the onset of the code of conduct ahead of the Lok Sabha elections, the divestment process was put on hold. In 2017-18, Pawan Hans recorded a net profit of Rs 19.6 crore and in 2016-17, it posted a bottom-line of Rs 254 crore.
However, the profit was higher in FY 17 because the government converted dues of Rs 130.91 cr (principal amount) into equity share capital and waived off the balance Rs 339.31 cr (interest cost). Accordingly, the interest amount waived-off was recognised as an extraordinary gain for FY17.
Till July, only 35 helicopters (including one helicopter taken on lease from HAL) had a valid airworthiness review certificate.
The company has also struggled with high insurance cost in FY17 and FY18 because of the rise to accidents of its helicopters, insurance cost of PHL helicopters has increased significantly in FY 17 and FY 18. However, PHL is taking steps to reduce insurance costs by inviting tenders for insurance advisors with an aim to reduce the insurance cost.