While the commission has done well to address the immediate need for a fund infusion via the divestment, once again the government has stopped shy of completely curing the malaise that ails Air India. There is no denying the debt trap that the company has slid into, a fact highlighted by the carrier's precarious financial position. Total short-term borrowings of the national carrier stand at Rs 1,100 crore for 1997-98 and the financial plight of the company is further highlighted by a debt equity ratio of 4.99:1.

The contentious issue regarding new sharesproviding a 40 per cent stake to a strategic partner still has a few grey areas. Interestingly the commission has recommended a 30 per cent foreign equity participation, within the strategic partnership from a consortium of airlines and investors. Yet recent policy has dictated that domestic air-taxi operators divest themselves of all foreign holding? Given this precedent would not the Tata's proposal for an airline have a strong case now?

Furthermore, for Air India to regain its stature as a global player, rapid fleet expansions are a necessity. However, the acute shortage of funds and the lack of any basis to leverage immediate funding is a deterrent. More importantly with the divestment issue being extremely politically sensitive, it remains to be seen how it is pushed through in this political climate.Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.