PM Narendra Modi’s administration is considering a plan to exclude $7 billion of Air India’s $11 billion debt in a bid to lure buyers. The administration plans to ask proposed investors to take over Rs. 30,000 crores of the airline’s debt, backed by the carrier’s aircraft. The government may call for the so-called expression of interest as early as December 15.
A successful sale of Air India is crucial for Prime Minister Narendra Modi to help bridge a widening fiscal deficit exacerbated by dismal tax collections and a $20 billion corporate tax cut. Air India, which started as Tata Airlines in 1932 and later became state-owned, hasn’t made money since its 2007 merger with state-owned domestic operator Indian Airlines Ltd. The international carrier is saddled with $11 billion in debt.
A group of ministers overseeing the sale of Air India has already approved selling the entire government stake in the carrier and its low-cost, overseas unit, Hardeep Singh Puri said in a separate written reply to parliament. Pumping in more taxpayer funds into the airline in a competitive market “would not be the best use of scarce financial resources of the government,” Puri said.