LONDON – The Indian Government has today announced that they are going to “sought funds for infusion of equity in Air India under (its) turn around plan” from the Indian Parliament.
To fund such an infusion, the government must gain the approval for an additional net spending of 59.51 billion rupees, on top of the already budgeted 24.42 trillion rupees for the 2018/19 financial year.
This comes following the news that the Indian Government was to hold off on selling a majority stake in the airline due to a lack of interest from bidders because of their heavy debt flow currently.
The sale on the political front was also key to the Prime Minister’s goals of helping keep the fiscal deficit down to 3.3% of total GDP, which is something that is under pressure for the 2019 national elections.
The Indian government currently has a 100% stake in the airline and they are currently looking to gain at least $142.87 million USD worth of capital injection to pay off its vendors.
Air India is requiring a total of $309 million of additional equity which they will hope to fund through their private shareholders. They had their 76% stake on sale, with the hopes of keeping a 24% stake through privatization bids but subsequently failed.
As of March 2017, the carrier is in debt by around $7.16 billion, with the government ministers for Aviation Jayant Sinha saying that the government will continue to support the carrier while they work on alternatives for sale.
Such alternatives in the making have been consisting of the likes of bringing the carrier back to profitability before they sell, which could take over five years.
The carrier currently employs over 27,000 staff, so if the carrier is to go into administration, then a lot of jobs would be subsequently at risk and would risk more political implications for Modi, the Indian Prime Minister, especially going into the 2019 National Elections. If Modi is booted out in 2019, then it is unclear what approach the new government will take regarding Air India.