PM Modi’s divestment plans hit rough waters with AI

New Delhi: India’s offer to sell a stake in Air India failed to draw a single bid by the Thursday deadline, underlining the challenges it faces in fixing the debt-laden state carrier and meeting a broader target of stake sales in government-held firms.

Prime Minister Narendra Modi’s government announced a plan in March to divest a 76 percent stake in Air India and offload about $5.1 billion of its debt.

The ministry of civil aviation said on Twitter on Thursday evening that it had received no bids, adding its next move on the stake sale would be decided “appropriately”.

India’s civil aviation secretary, R.N. Choubey, said on Wednesday the government was unlikely to further extend the May 31 deadline.

Earlier this month the government had eased some terms and extended the period to make bids, but still found no takers for the airline, which flies some lucrative routes but also has one of the industry’s highest employees-per-aircraft ratios.

Selling the state carrier had been seen as key to Modi’s plans to divest assets and help keep the fiscal deficit at 3.3 percent of GDP, a goal already under pressure from giveaways to farmers and other welfare benefits ahead of a national election in 2019.

Renu Kohli, a Delhi-based independent economist, said the government would now need to step up elsewhere to meet its divestment target.

“Relative to what we are seeing this year ... uncertainty in the financial markets, aggravated distress among banks and rising interest rates and oil prices, it does not seem like a very supportive time for people to come and buy such an asset,” Kohli said, adding that Air India needed large investment.

The government may look to raise a record Rs 1 lakh crore ($15 billion) from the sale of state assets in the current fiscal year that started on April 1, and Air India was expected to be a significant contributor.

While the government had not set any minimum price, banking sources had told Reuters the sale could have fetched between 80 billion and Rs 100 billion ($1.2 billion to $1.5 billion).