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India may revise Air-India divestment plans

India may change the rules to privatise national carrier Air-India if the Tata group, the only remaining contender, also withdrew from the bidding, a top government official said on Monday.

The divestment was dealt a major blow at the weekend when Singapore Airlines, a partner of the Tata group for a 40 per cent stake in Air-India, pulled out of the bidding citing strong political opposition to the privatisation.

"If the Tatas walk out, we will have to examine whether to sell Air-India at all or to sell it after changing the rules," Pradip Baijal, the top bureaucrat in the department of divestment, said.

"We don't expect people to come in again with the same rules if the Tatas were to pull out," he said, but did not elaborate what changes would be made.

The Tata group said it was keeping all options open including bidding on its own for a stake in Air-India.

"We are assessing the situation with an open mind," a group spokesman said.

"It is less than two days since Singapore Airlines pulled out, and it is too early to say which way we will go," he added.

Estimates of the loss-making Air-India's total value range widely -- from $2.13 billion to a conservative $500 million.

Disappointment

"We're disappointed as we had been working on this deal for the last eight to ten months and had almost concluded a draft of the shareholder and share purchase agreement with the concurrence of SIA," Baijal said.

"Everyone understands that in the first few disinvestments in any country there is bound to be opposition; I thought they understood this as well."

He said the salt-to-software $8.4 billion Tata group, which founded Air-India before it was nationalised in the 1950s, can bring another partner "with our concurrence".

"That partner can accept the agreements we came close to finalising with Tata-SIA or raise its own points, which we will consider," he said.

The Business Standard newspaper quoted unnamed Tata group sources as saying the conglomerate would start a dialogue with Delta Airlines and Air France which together had shown interest in Air-India earlier.

It said Germany's Lufthansa could be another alternative partner.

The Tata spokesman declined comment on the report. But Manfred Reimer, Lufthansa's vice-president Asia and Pacific said in Bangalore, that it had no interest in joining hands with the Tatas for Air-India.

Tough task

Asked how long the government would give the Tatas to come up with an alternative partner or pull out, Baijal said it could be anything from six days to six months, but not more.

"If you look at the divestment in the United Kingdom there were setbacks in the early years -- it's a learning curve for all of us," he said.

Divestment Minister Arun Shourie called SIA's withdrawal "a substantial setback" and said it did not do any good for the country's image.

"We should learn a lesson from it. The atmosphere created by fabricated allegations is scaring away bidders," he told reporters at the weekend in Delhi.

Apart from the Delta-Air France combine, Swissair, Emirates and British Airways showed an initial interest in Air-India but dropped out along the way.

The sale of the Air-India stake, seen as a litmus test of the government's will to press ahead with its ambitious privatisation programme, is scheduled to be completed by the year-end.

India has lined up 27 state-run firms for stake sales and set a target of raising Rs 120 billion and analysts say the government's plans could be hit by any setback to the Air-India privatisation.

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