Debt-laden Air India may be shut down

India's state-run airline will have to cease operations if it is not privatised, the country's junior minister for civil aviation said in parliament on Wednesday in response to a lawmaker's question on the subject.

"The airline will have to close down if it's not privatised," Mr Hardeep Singh Puri said. "Once we invite bids, then we'll see how many bids will come in."

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 US$20 billion corporate tax cut, reported Bloomberg.

Air India, which started as Tata Airlines in 1932 and later became state owned, has not made money since its 2007 merger with state-owned domestic operator Indian Airlines. The international carrier is saddled with a debt of US$11 billion.

A group of officials, including India's home and finance ministers, is finalising the process of inviting bids from the private sector for the loss-making national carrier. The company has lucrative landing slots in India and across the world, but has been a burden on the exchequer for years.

Mr Modi's administration is considering a plan to exclude US$7 billion of the airline's debt in a bid to lure buyers, people with knowledge of the matter said earlier on Wednesday.

The government may call for the so-called expression of interest as early as Dec 15, they said.

Officials are still deliberating over some details, said Mr Puri. Once they are finalised, the government will invite bids, he said, adding that India is committed to selling the company.

Last year it failed to attract any bidders when it tried to sell a 76 per cent stake in the airline and offload about US$5.1 billion of Air India's debt.

It is now re-evaluating some of the terms and is open to selling the airline in its entirety, Mr Puri said in a written response to a separate question in parliament.

One of the biggest hurdles, however, is its large number of employees - Air India has about 9,400 permanent staff and 4,200 contract workers.

Mr Puri said in parliament that the government is committed to securing a deal that is favourable for the employees.



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