NEW DELHI: The Central government plans to transfer the debt and non-core assets of the financially-strained national passenger carrier Air India to a special purpose vehicle (SPV), a senior Finance Ministry official said on Tuesday.
Accordingly, the proposal is expected to financially revive the debt-ridden airline through the sale of its non-core assets.
"What they (Air India Board) have suggested is ... a proposal ... for making a special purpose vehicle, transferring its non-core assets and the unsustainable debt to that SPV and then encashing through sale or divestment of those assets," the ministry official said.
"That process is what we had proposed … potential bidding for sale of Air India. They have suggested that the same thing may be done now so that Air India can stand on its own feet and start turning around."
Further, the official said: "As of now, as stated in the budget that capital infusion will be made... Other than that there is no such plan for fresh capital infusion."
On August 7, Parliament had approved the additional gross additional expenditure of Rs 980 crore for equity infusion into the heavily indebted airline.
The Central government had invited Expression of Interest (EoI) on March 28 this year for disinvestment of Air India including the national carrier's share-holding interest in the Air India Express Ltd and Air India SATS. But, it received no responses till May 31, the closing day.
However, the government afterwards stated that it is still committed to the idea of Air India's strategic divestment.
The government had on May 1 released a detailed document on clarifications sought by interested bidders regarding the divestment process. This had outlined that net current liabilities are Rs 88.16 billion (Rs 8,816 crore) and "these will remain with AI and AIXL (Air India Express) as these have been incurred in the course of business".
"After deducting Rs 88,160 mn from Rs 333,920 mn, the remaining figure of Rs 245,760 mn is the debt and liability quantum that will remain with AI and AIXL," the document said.
The Central government owns 100 per cent equity of Air India. In turn, the airline holds full stake in Air India Express, while it holds 50 per cent stake in the joint venture AISATS.
Accordingly, it has been planned to divest 76 per cent government stake in AI, 100 per cent in AIXL and 50 per cent in AISATS.