Government Says Business Environment Not Good For Air India Sale In Immediate Future

Government has put on hold plans to sell a stake in debt-laden state-run carrier Air India because of high oil prices and volatile foreign currency movements, the country's junior civil aviation minister said on Thursday.

"The present environment is not conducive to stimulate interest amongst investors for strategic disinvestment of Air India in the immediate near future," Hardeep Singh Puri said in parliament.

The government will revisit the sale once global economic conditions become more conducive, he said.

The aviation sector is facing turmoil with one of its biggest private carriers, Jet Airways, facing bankruptcy, while passenger growth in the market overall has slowed.

India last year failed in its attempt to sell a 76 per cent stake in loss-making Air India due to a lack of interest from bidders and said it would return with an alternative proposal soon.

While the government said at the time that it was forced to review the plan because of high oil prices, a weaker rupee and rising interest rates, potential bidders suggested they found some of the stake sale terms too onerous, making it a non-starter.

The government has since hived off a part of the airline's debt, about Rs 30,000 crore ($4.34 billion), into a separate entity and is trying to sell off some of its assets and subsidiaries, such as the ground-handling unit, piecemeal.

"The government has prepared a revival plan for Air India which includes a comprehensive financial package," Mr Puri said, adding it would focus on increasing revenue and reducing costs.

The government injected Rs 3,975 crore into the airline in the fiscal year that ended March 31. Air India is expected to report a loss of more than Rs 7,600 crore for the same year, Mr Puri told in parliament.