The Narendra Modi government’s ambitious plan to sell Air India to private parties has bombed, with not a single bid coming in till this evening, when the deadline for expression of interest expired.
For months, industry has been abuzz with theories about a large business conglomerate and a domestic airline which were two of the interested parties. But both apparently developed cold feet at the last moment.
The failed attempt not only puts a question mark over fixing the debt-heavy airline, but also the government’s larger plan to see stakes in companies it owns significant stakes.
So what is the road ahead for the Air India sale? Will the disinvestment be scrapped? Is it the end of the road for the much-hyped sale of the struggling airline?
The process now involves going to the evaluation committee and a core group on the divestment process headed by the cabinet secretary and the finance minister-led alternate mechanism or group of ministers.
Chances are that there will be a rebid, but that will be painful because the entire process must be repeated, with fresh terms and conditions.
What we know is that the path ahead for Air India will be decided by four of Modi’s trusted ministers - Arun Jaitley, Suresh Prabhu, Nitin Gadkari and Piyush Goyal.
The quartet forms a group called the Air India Specific Alternate Mechanism (AISAM) which will take a call on the future of the disinvestment process, after the bid situation becomes clear today.
It may decide to scrap the process, call for a rebid or decide not to sell the airline after all.
Obviously then, the future course of action on Air India may be an entirely political call.
Remember, there has been enough opposition to the sale of the Maharaja. The RSS has hinted opposition against any move to sell the airline to foreign carriers, BJP's own Subramanian Swamy alleged a "scam" in the entire process and employee unions are totally opposed to the sale.
This evening, a source close to developments told
CNBCTV18.COM that the government needs to come back with absolutely no conditions and let the market decide the price at which the airline should be sold, if it still wants to sell the airline that is. But perhaps this person was being too optimistic - price and bid conditions certainly proved to be a detriment, but this is not the only problem which plagued the Air India sale.
The disinvestment never really got off to a flying start. First, it was tepid response from potential bidders, with a prominent airline even walking out of the entire game early on.
Next, remaining bidders began clamoring for tweaking bid conditions, objecting to many of the basic premises which form the Expression of Interest (EoI) document.
There has been widespread skepticism about government’s toehold, since it proposes to retain 24% stake even after the disinvestment process has been completed.
The bidders’ complaints were followed by a veiled threat by the powerful Sangh lobby against selling off Air India to foreigners.
The Air India disinvestment process began on March 28 this year and has been billed as the largest strategic disinvestment in Independent India.
The government proposes to offload 76% of its stake in carrier and its low cost international arm, Air India Express, besides all of its 50% stake in ground handling joint venture Air India SATS Airport Services Private Limited (AISATS).
Any prospective bidder would want some of these sops: complete control with government relinquishing its 24% stake as well, lower debt liability and clarity on manpower issues post the disinvestment.
The Swadeshi Jagran Manch is preparing a roadmap for the airline to continue with government ownership and employee unions are opposed to the sale.
Remember, a non-airline company, with no experience in running an airline, could have also placed a bid for Air India as per conditions set out till now.
This, more than anything else, shows all that is wrong with the AI sale and is a possible pointer to why the sale may eventually get stymied all together.
Sindhu Bhattacharya is a journalist based in Delhi who writies on a range of topics in business and economy