'Writing off some debt of Air India, could be a wise move', Panagriya
The Dollar Business Bureau
Niti Aayog’s outgoing Vice Chairman Arvind Panagariya has said ‘writing off some debt of Air India, so as to make it attractive to prospective investors, could be a "wise" move.’
Niti Aayog had suggested to the government to privatise the public carrier and a committee was set up under Finance Minister Arun Jaitley to carry forward the process.
"I don't know whether you need to write off debt to find a buyer, I don't know the market. Transaction advisers are competent on that," Panagariya told Press Trust of India in an interview.
"I am just saying that it's probably wise to write off part of the debt before this happens (privatisation of Air India)," he added.
Regarding the need for asset stripping before the sale of the carrier, he said, "No, why would you do asset stripping. It is a well running, well-functioning airline."
Panagariya, who has resigned to return to teaching in the US, said there are details in the airlines’ that need to be considered by the advisers.
Recently the Minister of State for Civil Aviation Jayant Sinha had revealed that Air India's total debt stood at Rs 48,876.81 crore at the end of March 2017.
Out of the total amount, Rs 17,359.77 crore is aircraft loan, while Rs 31,517.04 crore is working capital loan. "The rates of interest on aircraft/ working capital loans are linked to the respective bank's prime lending rates/base rate/libor plus margins prevalent at the time when these loans are taken," Sinha had revealed.
It should also be recalled that the previous government had extended a bailout package worth a little over Rs 30,000 crore to the national carrier for 10 years starting from 2012.
The present Finance Minister and the committee is finalising the modalities and held its first meeting last month.
IndiGo, the country's largest airline with a domestic market share of a little over 41 per cent, is keen on snapping up the international operations of Air India as well as its profitable low-cost arm Air India Express.
As an alternative, the budget carrier is "equally interested" in buying out all the operations of Air India and Air India Express, according to the letter sent by IndiGo President Aditya Ghosh to the civil aviation ministry.