Panel seeks details on AI divestment :

Panel seeks details on AI divestment :

Context :

A Parliamentary Standing Committee has sought details from the government on its strategic disinvestment plans for national Air India.

Introduction :

The department related Parliamentary Standing Committee on Transport, Tourism and Culture, chaired by Rajya Sabha Member of Parliament Mukul Roy, is set to meet the Central government officials today.

Key points :

• The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Narendra Modi, on June 28 gave its in-principle approval for the strategic disinvestment of Air India and subsidies.
• The CCEA also set up a group of minister under Finance Minister Arun Jaitley to examine the modalities of the national carrier’s stake sale. The Ministerial group will decide upon the “treatment of unsustainable debt of Air India, hiving off of certain assets to shell company, de-merger and strategic disinvestment of three profit-making subsidiaries, quantum of disinvestment and the universe of bidder.
• Union Cabinet gave its nod for Air India’s strategic disinvestment, India’s largest low-cost carrier IndiGo expressed interest in acquiring the flag carrier’s airline business, mainly related to its international operations.

Background :

• The decision to divest to stake in Air India was based on government think-tank NITI Aayog’s recommendations may this year.
• The Aayog had given the rationale for the disinvestment of Air India and has attributed the main reason as fragile finances of the company. Air India has been incurring continuous losses and has huge accumulated losses.
• NITI Aayog in its report on Air India says that further support to an unviable non-priority company in matured and competitive aviation sector would not be the best use of scarce financial resources of the Government.
• Air India’s market share on domestic routes had declined to 14.2% in 2016-17, from 17.9% in 2014-15.
• Air India had accumulated total debt of Rs 48,876 crore till March 31, 2017.
• The carrier has been reporting continuous losses due to its high debt with its net loss at Rs 3,728 crore in 2016-17, compared with Rs 3,836 crore in 2015-16.
• Air India, which has a debt burden of more than Rs 52,000 crore, is staying afloat on taxpayer’s money.
• The previous UPA government had extended bailout package worth little over Rs 30,000 crore to the national carrier for a period of 10 year starting from 2012.