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'No decision to float Indian Airlines shares'

The government said on Thursday that it had taken no decision on whether to float shares of state-run carrier Indian Airlines and that the bidding process was continuing.

Asked about a newspaper report that the government planned to scrap the bidding process and launch an initial public offer for the carrier, Pradip Baijal, the most senior civil servant in the divestment ministry, told Reuters: "No decision has been taken yet. The bidding process is still on."

Baijal, whose ministry is spearheading India's privatisation programme, declined further comment.

The Hindustan Times reported on Thursday that the government was seriously considering abandoning the current divestment process in Indian Airlines and would offer its shares in the domestic market later this year.

It said the department felt such a method would trigger less controversy and fetch a better price for the loss-making airline.

Only two groups -- the Hindujas and consumer appliance company Videocon International -- have bid for the 26 per cent stake the government has put up for sale in Indian Airlines and both are under a cloud.

Three Hinduja brothers are facing trial in India on charges of receiving kickbacks from Sweden's Bofors in a $1.2 billion artillery sale to the Indian army in 1986. The brothers deny any wrongdoing.

Videocon has been banned from issuing new shares for three years by India's market regulator because of its alleged involvement in a share price manipulation scandal.

Analysts say the ban could restrict Videocon's efforts to raise money to pump into the airline, which needs a fleet overhaul if it wins the bidding for Indian Airlines. The government is also selling a 40-per cent stake in long- haul carrier, Air India, for which there are only two bidders as well.

They are the Hindujas and a consortium made up of Singapore Airlines, a major force in the Asian airline industry, and the Tata group, one of India's largest conglomerates.

The Hindustan Times said that a similar proposal to sell Air India on the stock market had been examined and rejected as the government's advisors had said there was no market interest in the carrier and that an IPO would not attract any investors.

The government has said it plans to wrap up the sale of the two airlines in the current financial year in a bid to push its flagging privatisation programme.

India has said it is aiming to raise Rs 120 billion through the sale of stakes in state-run firms in 2001-02.

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