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Context: Recently, the Government of India announced few changes to facilitate the sale of Air India.
Background
- As part of the strategic disinvestment, the government initiated for the complete disinvestment process of debt burdened Air India.
- Before the start of the current financial year, Air India had more than Rs 60,000 crore as debt and with the coming of the pandemic, debt burden is getting accumulated.
- Due to increasing debt burden, the Government has been pushing for the strategic sale of Air India.
- Following the failure to receive a single bid in the first attempt the government has initiated the disinvestment process of Air India for the second time.
What are the new changes?
- Earlier, the government had mandated a fixed level of debt i.e. 23,286.50 crore to be taken by buyers along with the sale.
- The government, through its recent announcement will now allow the prospective bidders the flexibility to decide the level of debt they wish to take on while buying the airline.
- Second, the winning bidder will have to deposit at least 15 per cent of the bid amount in cash with the government ahead of the share transfer.
- Also, the government has extended the deadline from October 30 to December 14 to allow potential bidders to carefully evaluate the new terms and conditions.
Whether the latest changes would be enough to attract the buyers?
- Lack of buyers: Most best bidders who are affected by the pandemic are now struggling to survive themselves.
- Unattractive Aviation sector: Estimates suggest that most airlines will struggle to be financially viable even in 2021 fearing the second wave of COVID infections.
