NEW DELHI, June 1: The government today announced the phased disinvestment of government equity from the domestic carrier, Indian Airlines, down to 49 per cent over the next three years. The proposal is in keeping with the recommendations of the Kelkar committee, set up to go into the financial restructuring of the airline. The moves are expected to improve the working of the airline and expand its capacity.The committee had warned that if the government did not reduce its holding in the chronically loss-making organisation, the airline's share in the market would fall from 67 per cent to just 11 per cent by the year 2000.
The government expects to attract a good price for the airline which has for the first time in years, recorded a profit of Rs 45 crore. Although the profit was scaled down from the first estimate of Rs 90 crore, the airline has managed a turnaround after eight years, signalling an improvement in performance.
Earlier this year the airline was also granted a Rs 325-crore package forboosting its equity base and for its working capital requirements in return for a set level of financial and operational efficiency. Airline officials and the ministry of civil aviation expect that at the end of three years IA will be in a position to command a good price in the market.
The biggest problem for the government is likely to come from the employees' union which has been opposing any moves to privatise the airline. As a private entity with access to private sources of funds the airline could give existing private players a run for their money.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
