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Air-India bids in spotlight as privatisation panel meets

India's privatisation panel was due to meet late on Friday to approve new selloff guidelines seen as key in determining whether Britain's Hinduja brothers can stay in the race to buy control of Air-India, a minister said.

Divestment Minister Arun Shourie said the Cabinet Committee on Divestment meeting would be followed by a meeting by the Cabinet Committee on Security to give final clearance to Air-India's bidders.

"The divestment committee will take a view on Air-India's bidders based on the (new) guidelines and decisions on security aspects will be taken by security committee," he said.

The divestment department began drafting the guidelines after controversy erupted earlier this year about the track records of certain companies bidding for state-owned firms.

There has been widespread media speculation the government may not clear the Hindujas' bid on security grounds as three of the brothers face charges in India of receiving kickbacks from a $1.2 billion artillery sale to the Indian Army in 1986.

The brothers deny any wrongdoing.

A financial daily reported on Friday the privatisation panel was split between "hardliners" who wanted to debar all firms facing all criminal charges and "pragmatists" who wanted to exclude only those companies charged with security-related offences.

There are just two bidders for the 40 per cent stake in the international carrier whose sale is seen as a litmus test of the government's commitment to privatisation of state-run companies.

Aside from vehicle-maker Ashok Leyland, controlled by the Hindujas, the only other bid for the carrier has come from Singapore Airlines which has teamed up with the Tatas.

The government has already said it would proceed with Air-India's privatisation even if there was only one bidder in the fray as long as the offer met the reserve price.

The divestment panel is headed by Prime Minister Atal Bihari Vajpayee and includes the finance, home and defence ministers. Most of them also sit on the security panel.

The next stage in the sale process of Air-India will be the government's call for price bids. The sale entered the home stretch on Wednesday after the Divestment panel approved the shareholders' agreement stipulating that two-thirds of the airline's board should be Indians.

India plans to raise Rs 120 billion through sale of stakes in state-run firms in this financial year. It has consistently failed to meet its target in the past due to political and labour opposition.

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