Air India Disinvestment by BJP Government & Acquisition by TATAs: Selling Family Silver or Saving Taxpayer’s Money

Add Review

Register now for latest MBA Exam & Admissions Updates

Air India is expected to be handed over to Tata Group very soon as the government has decided to complete the disinvestment process on January 27, a senior official said. Sharing the AIR India Disinvestment Tata take over process, Vinod Hejmadi, Director Finance, Air India, said in an email to sent to employees on Jan 24, "The disinvestment of Air India is now decided to be on the 27 January 2022. The closing balance sheet as on 20th Jan has to be provided today 24th Jan so that it can be reviewed by Tatas and any changes can be effected on Wednesday". Recently, the government approved the highest price bid of Talace Pvt Ltd, a wholly owned subsidiary of Tata Sons Pvt. Ltd for sale (Disinvesting) of 100% equity shareholding of Government of India in Air India (AI).  After this Air India disinvestment Tata will own 100% stake in AI, as also 100% in its international low-cost arm Air India Express and 50% in the ground handling joint venture, AI SATS. 

Alert! MBA Admissions 2024 Closing for Top CMAT, MAT Colleges | Apply Now 
Sparsh Greater Noida | Closing Soon | Apply Now IBA Bangalore | Closing Soon | Apply Now
JIMS Rohini Delhi | Closing Soon | Apply Now Jaipuria Noida, Lucknow | Closing Soon | Apply Now
S P Jain Global Mumbai | Closing Soon | | Apply Now MET MUMBAI | Closing Soon | Apply Now
JIMS Rohini Delhi | Closing Soon | Apply Now CIMP Patna PGDM Admission 2024 | Apply Now
SSIM Hyderabad | Closing Soon | Apply Now Mahindra University HYD | Closing Soon | Apply Now
August MAT Exam 2024 Registration Open – Apply Now

The question arises is Air India Disinvestment by BJP Government and acquisition by the TATA Group selling Family Silver or Saving Taxpayer’s Money? Since this is a current topic and has significant political and economic ramifications, this GD Topic is a hot GD Topic for GD PI WAT MBA admission process. presents key highlights and details of this hot GD Topic. 


Reasons for Disinvestment:

  • It is expected that with disinvestment of Air India, its operations and costs will get streamlined, services on board will improve. This will be good for consumers and all stakeholders.
  • A strong international carrier in India will give a boost to the large airports built in Delhi, Hyderabad, Mumbai and Bengaluru which along with AI will be able to win back some of the tourist dollars from Indians travelling abroad who are currently travelling on foreign carriers.
  • A successful turnaround of Air India could also help the Indian economy as it is a well-established fact that aviation has a multiplier effect on the economy.
  • There is a pressure on the government to raise resources to support the economic recovery and meet expectations of higher outlays for healthcare.
  • It will save taxpayers money from paying for daily losses of AI.
  • It will help push other tough decisions the government is keen on taking.

air india

What is Disinvestment?
Before we discuss AI disinvestment, let’s start with the basic question - What is Disinvestment? Disinvestment means sale or liquidation of assets by the government, usually Central and state public sector enterprises, projects, or other fixed assets.The government undertakes disinvestment to reduce the fiscal burden on the exchequer, or to raise money for meeting specific needs, such as to bridge the revenue shortfall from other regular sources.The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal department for the strategic stake sale in the Public Sector Undertakings (PSUs). 

Alert! MBA Admissions 2024 Open for Top Colleges | Apply Now
SCMS Cochin | Closing Soon | Apply Now Rajagiri Business School Kochi | Apply Now
SSIM Hyderabad | Closing Soon | Apply Now Sparsh Greater Noida | Closing Soon | Apply Now
CIMP Patna PGDM Admission 2024 | Apply Now Delhi School of Business (DSB) | Apply Now
Rajagiri Business School Kochi | Apply Now Jaipuria Noida, Lucknow | Closing Soon | Apply Now
MET MUMBAI | Closing Soon | Apply Now NDIM New Delhi (NDIM) | Closing Soon | Apply Now


Air India Divestment – The History  
Air India Privatisation Saga began in 2001 when the first attempt to conduct a strategic sale of the airline was made during the NDA regime when Atal Bihari Vajpayee was the Prime Minister. At that point, the government wanted to offload 40 per cent of the airline’s equity. Several foreign airlines including Lufthansa, Swissair, Air France-Delta, British Airways, Emirates and Singapore Airlines expressed interest. This process could not be concluded when the government said that foreign airline will have to partner with an Indian company to bid, as most airlines pulled themselves out of the race. Singapore Airlines, which partnered with Tata Group, remained in the fray. Due diligence was also completed. But it pulled out at the last moment. Tatas did not want to bid alone, and the Air India Sale failed.


Why Air India Disinvestment - Why Governments keen to sell the airline?
According to some estimates, Government in the last decade has infused over ₹1 lakh crore in Air India in the form of cash and credit guarantee support. But the airline continued to make losses, which stood at nearly ₹20 crore a day or ₹7,046 crore for 2020-21! And debts ballooned. Accumulated losses as of March 2020 stood at over ₹70,000 crore. Auditors had voiced their doubts over the airline remaining a going concern. So, the choice before the government was to go for Air India Sale or to shut it down.


Modi Government & Air India Divestment – The first attempt in 2017 failed
In the process of Air India Disinvestment, in 2017, Narendra Modi-led government tried to proceed with Air India Sale. By then significant changes had happened to the airline. In 2007, Air India was merged with Indian Airlines, which worsened its already poor financial position. To sweeten the divestment deal, the Modi government decided to off-load the majority stake. The Centre would hold on to 24 per cent of the equity in the airline; and 76 per cent would be divested. The acquirer would also have to pick up a portion of the airline’s debt.  Investors backed away at the prospect of picking up debt, and not a single bid was received. 

Alert! MBA Admissions 2024 Open for Top Colleges | Apply Now
CIMP Patna PGDM Admission 2024 | Apply Now JAGSoM Bangalore Admission 2024 | Apply Now
IBA Bangalore Admission 2024 | Apply Now CIMP Patna PGDM Admission 2024 | Apply Now
SSIM Hyderabad Admission 2024 | Apply Now IBA Bangalore | Closing Soon | Apply Now
IPE Hyderabad Admission 2024 | Apply Now Appejay School of Management | Apply Now

Modi Government’s Air India Divestment 2021 Plan Finally Works
In January 2021, the Modi government brought Air India back to the strategic sale table with significant changes in terms. The biggest change was that the Government said it would offload 100 per cent of its stake in Air India. Further, over the past two years, part of Air India’s debt was transferred to a special-purpose vehicle, and in this round of the disinvestment process, the buyer was to take on Rs 23,286 crore of debt out of a total ₹60,074 crore. However, this again was a hurdle for a new investor, given that in addition to cleaning the debt, the airline would need further investment to become healthy. In October 2021, the government further tweaked the bidding parameters. A key change was that the Centre took a call to allow prospective bidders the flexibility to decide the level of debt they wish to take on along with the loss-laden airline. The government said that potential bidders will be allowed to place their bids based on enterprise value, which accounts for the company’s equity and debt.

N. Chandrasekaran

Modi Government Sells Air India to Tata Sons
In all, there were seven entities, including Talace (a Tata Group subsidiary) and SpiceJet promoter Ajay Singh (in his personal capacity), which had evinced interest in acquiring Air India. Only two -- Talace and Ajay Singh - qualified to reach the bidding stage. Talace won the bid, by offering ₹18,000 crore in total as the Air India Disinvestment price against Singh’s ₹15,100 crore offered towards Air India Disinvestment Price. The reserve Air India Disinvestment price for the deal was set at ₹12,906 crore. The winning bid of the Tatas included a ₹2,700 crore cash component and ₹15,300 crore of debt and at this deal AIR India Disinvestment at the Tata offered price was finalized and now finally Modi Government sells Air India to Tata Sons.


Apart from Air India, Tata group gets Air India Express and 50 per cent stake in Air India SATS which provides ground handling services. For Tatas, over and above the emotional aspect of regaining control of an airline they started, AI’s acquisition is a long-term bet. Tata Sons, who originally founded the airline in 1932 as Tata Airlines before it was nationalised, already operates two airlines in India — Vistara (a joint venture with Singapore Airlines) and AirAsia India (a joint-venture with Malaysia’s AirAsia). According to reports, the Tata Group may consolidate all airline companies under a single brand after discussing with its partners.


Successful Air India divestment to help Government, Economy
The government has set high targets for disinvestment, and the success of divesting Air India will send the proper signal to the investors. This is, when big ticket disinvestment such as BPCL and LIC are in the pipeline. This will benefit Indian economy as a whole. 

Latest GD Topics: Read 200+ Group Discussion Topics 2024 for MBA Admissions  
India Vs Maldives: How Lakshadweep Can Become A Major Tourist Destination
One Nation One Poll’: Benefits are More for India
Viksit Bharat@2047: A Timely Program for India's Transformation
The Deepfake Dilemma: Unravelling the World of AI-Generated Content
Narayana Murthy's Call for a 70-Hour Workweek: A Debate on Pros and Cons 
Peer Pressure and Family Pressure - Can it make or break your future?
Aim for the Moon, if you miss, you may hit a Star
Foreign Universities in India: Will it raise academic standards and benefit Indian students, parents?
World War 3: Will Russia Ukraine Conflict result in Third World War?
Union Budget 2023-24: Expectations & Key Highlights
Digital Public Goods (DPG): India’s approach and opportunities for the World
Tech Layoffs: Top Tech Layoffs At Big Tech Companies In 2022
India as the world’s 5th largest economy: Set to Become 4th by 2022
Indian Digital Rupee: A landmark financial initiative?
Moonlighting in India - What, Why and Should of this HR nightmare
5G Telecom Services in India – Benefits and Impact
Buy Now Pay Later (BNPL): A convenience or a trap
National Logistics Policy: Will it Reduce Costs & Improve Competitiveness of India
Agnipath: Will it Prove a Military Transformation Scheme?
Union Budget 2022: Key Highlights; will it propel post pandemic Economic Growth?
Crypto Currency: A bright future or just a fad
Privatization of Public Sector in India: A right step or selling family silver?
Social Media: A boon or a bane for society and individuals
E-Learning: A substitute for Classroom Learning?
Farm Laws Repealed: PM MODI withdraws the three farm laws
Central Bank Digital Currency (CBDC): Impact on Indian Financial System & Cryptocurrency