The keys to Air India will go to the Tata Group in December. However, valuation experts say that by then it would have cost the government about Rs 1,57,339 crore in the last 10 years. Obviously, this money will go from the pockets of the taxpayers.
The valuation expert has made this estimate by looking at the expenditure on the airline since December 2009-10. The assessment includes all aspects such as debt owed to Air India, payments to vendors, cash received from Tatas to the government, assets left with the government of Air India after the sale, etc.
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Tata Group has won Air India by bidding for Rs 18,000 crore. Under this, the Tata group will have 100% stake in Air India and its subsidiary Air India Express, while it will have 50% stake in the Air India SATS joint venture.
After the transfer of ownership of Air India to the Tata Group, the government will be left with some of its non-core assets and debt of Rs 46,262 crore. This loan will be transferred to Air India Asset Holding Limited (AIAHL), a special purpose vehicle formed by the government.
Four subsidiaries of Air India will be left with the government. These include Air India Air Transport Services Limited, Airline Allied Services Limited (which runs Alliance Air), Air India Engineering Services Limited and Hotel Corporation of India. These four subsidiary companies will be transferred to AIAHL.
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In addition to the stake in Air India’s subsidiary, AIAHL has also been created to acquire Air India’s assets. This includes Air India’s paintings, aircrafts and other non-operational assets, non-core assets, movable and immovable properties, working capital loans without pledge of any assets and other assets and liabilities to AIAHL.
Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM), told that the government will now consider monetizing these four subsidiary companies and non-core assets of Air India.
According to valuation experts, after subtracting the estimated amount to be received by the government from these assets, the cost of the airline would come to Indian taxpayers at around Rs 1,57,339 crore. However, with this, experts also say that it will be difficult for the government to sell off the subsidiaries of Air India as it may need these subsidiaries and assets to keep Alliance Air’s operations going.
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An aviation expert at Morgan Stanley told Moneycontrol, “The government will need to keep AIATSL, AIESL and Alliance Air operational as they provide services under the UDAN scheme (UDAN scheme) to regional routes and smaller markets, where private companies are involved. They usually don’t show interest due to low profits.
The UDAN scheme reflects the theme of ‘Ude Desh ka Aam Nagrik’, which is the government’s regional airport development programme. Experts said that the valuation of Air India’s subsidiaries could be around Rs 1,000 crore. He said that private companies hardly show interest in smaller and less profitable markets. In such a situation, it will be difficult for the government to find potential buyers of these companies.
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Government’s expenditure on Air India in the last 10 years
- The debt of Air India, which will remain with the government even after the transfer of the airline to the Tata Group – Rs 46,262 crore
- Additional dues on Air India, which will be borne by the government (payment to the vendor) – Rs 15,834 crore
- Estimated loss in running Air India from September to December 2021- Rs 2,661 crore
- Government’s investment in Air India in the last 10 years (including the 29,646 crore loan transferred to AIAHL in 2019) – Rs 1,10,000 crore
- Government’s cash from Tata Group- -2700 crores
- The estimated amount to be received by the government from the sale of the remaining assets of Air India- -14,718 crore rupees
- The total bill on the taxpayer for running Air India- Rs 1,57,339 crore
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