MPs urge Air-India sell-off plan change

An Indian parliamentary panel asked the government on Tuesday to modify its plans to partly privatise Air-India to ensure a foreign partner would not get the power to veto decisions of the board of directors.

The panel recommended that the government reconsider the proposal to allow the sale of 26 per cent of the equity to a foreign partner and restrict it to 25 per cent.

Indian law requires a minimum 26 per cent stake for a seat on the board of directors and the power to veto board proposals.

"We have opposed the divestment of 26 per cent government stake in particular," Mohammed Salim, chairman of Parliament's standing committee on transport and tourism which submitted the report, told reporters.

He said the panel, comprising 45 lawmakers from various political parties, had unanimously opposed the government proposal, which he said would give foreign airlines control over India's international flag-carrier.

Members of the panel termed the privatisation proposal hasty and questioned the timing of the move, given that the government is planning a new aviation policy.

India's cabinet committee on divestment decided in May to sell 60 per cent of the government's holding in the loss-making airline to strategic and domestic investors and employees.

It set aside 40 per cent for a strategic partner, including a maximum of 26 per cent for foreign airlines.

Up to 10 per cent will be offered to employees and another 10 per cent to financial institutions.

Salim said: "With only 14 per cent share, the Indian partner may not withstand the pressures of the foreign partner.

"The foreign partner will be able to effectively control the Indian partner and through it Air-India. They will be able to veto any proposal in the board."

Air-India posted an operating profit of Rs 400 million ($8.75 million) in the fiscal year ended March 2000, its first operating profit since the mid-1990s.

The airline however posted a net loss of Rs 350 million for the financial year.

Salim said Air-India had tremendous unrealised value with its bilateral rights to various destinations.

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