India's government has imposed tough conditions for the future owners of Air India as part of its privatisation. Job cuts are barred for at least one year and it will be difficult to unload shares to other parties.

On 4 July, the Cabinet committee on disinvestment approved a draft shareholders' agreement, paving the way for final technical bids and financial offers to be received this month.

It provides details of the future make-up of the airline's board and the obligations of shareholders. Two-thirds of the airline's directors, as well as its chairman and managing director, must be Indian nationals.

The new owners are also not allowed to reduce the size of the carrier's large workforce for at least one year, after which attractive voluntary retirement packages must be offered. Major shareholders will also be barred from selling to competing airlines or persons deemed security risks. If they do they will, reportedly, have to sell their shares back to the government at half the purchase price.

Air India's partial privatisation has been in the works for more than a year. It should see a strategic partner taking 40% of the airline, of which 26% can be held by foreign airlines as well as domestic institutions. Airline employees will be able to take 10% each.

Only two groups remain in the bidding and there is speculation this may soon drop to one. One is the Tata Group and Singapore Airlines, who are jointly seeking the 40%. The other is the Ashok Leyland industrial group, which is controlled by the UK-based Hinduja brothers. Speculation is mounting that the Hindujas will be forced out of the race by the Indian Government because of corruption allegations, although the family denies these.

Source: Flight International