NICHOLAS IONIDES / SINGAPORE

Moves to take India's state-owned carriers into the private sector are left in disarray by government disqualifications

India's long-planned airline privatisations are in doubt after the government said it would disqualify key bidders, leaving Air India with one interested group and Indian Airlines with none.

Disinvestment minister Arun Shourie says the government has "prima facie" disqualified the UK-based billionaire Hinduja brothers from running for either carrier, and local group Videocon International from the race for Indian Airlines.

The Hinduja brothers are facing corruption allegations relating to an arms deal and the Videocon group is accused of share rigging. Both deny wrongdoing but new privatisation rules enable the government to disallow bids from companies that face allegations of impropriety.

The Hindujas and Videocon were the only interested parties left in the race for Indian Airlines and the government says it is now "reassessing" plans for the carrier's partial privatisation.

The Hindujas were also bidding for Air India through their local Ashok Leyland industrial group and their disqualification has left a consortium involving Tata Group and Singapore Airlines (SIA) as the only party remaining in play.

Shourie says Air India's privatisation will still go ahead despite there being only one interested party, and final technical and financial bids will soon be called for.

However, the group's financial bid must be higher than the reserve price, leading analysts to believe there is no guarantee that Tata and SIA will succeed.

A strategic partner for Air India will be offered 40% of the airline, of which 26% can go to a foreign component. Domestic institutions and airline staff are to each be offered 10%, leaving the Indian Government with 40%.

At Indian Airlines a 26% stake was to have been offered to a local strategic investor and another 25% to employees, the public and financial institutions, leaving the government with 49%.

Although the privatisation plans appear in disarray, Indian Airlines' privately-owned rival Jet Airways continues to push ahead with a planned initial public offering of up to 15% to foreign institutions. The country's largest privately owned airline, Jet is held by Naresh Goyal though his Tailwinds company.

Source: Flight International

Topics