Flying beyond controversy

THE CABINET COMMITTEE on Disinvestment's (CCD) approval of two important agreements connected with Air India's strategic sale - the draft shareholders' agreement and the share purchase agreement - is significant in many ways. In a legal and administrative sense there is substantial progress. The meandering but absolutely necessary processes applicable to any public sector sale are nearing completion. In December last year, Parliament was informed that as many as eleven stages will have to be gone through before a Government-owned company can be sold. For Air India, prospective buyers will now vet the two agreements, undertake a valuation exercise and submit their final bids. If past experience is any guide, the CCD's decision, noteworthy as it is, merely brings the Air India sale to its potentially most troublesome phase.

Few doubt the scope for controversy. Even compared to the highly- charged Balco strategic sale to Sterlite, Air India's will be complicated. That is partly due to the emotional appeal the national carrier has and partly due to the special circumstances surrounding Air India at the time of its sale. Of the latter, the important one is that only two bidders - the Tata-Singapore Airlines consortium and the Hindujas - remain, with the others bowing out early on. Opaqueness in the civil aviation policy has certainly not helped a more competitive bidding for a 40 per cent stake in Air India. But whatever corrective action needs to be taken in the policy framework will not be particularly relevant for Air India at this stage.

What will complicate the matter further is the Government decision to seek a security clearance of the bidders. Speculation is rife that only one bidder - the Tata-Singapore consortium - will remain. It is going to be an extremely tough and controversial decision to hand over the management control of the airline to a single bidder, even if the sole bid is in excess of the reserve price fixed. Any other course such as inviting fresh bids will be time consuming and set the clock back but will have to be resorted to, to keep the disinvestment process less controversial. Arriving at a reserve price is not going to be easy and the Government says it will call for two other merchant bankers to verify the calculations of the one already appointed for Air India. Given the fracas over the Balco valuations, the Government cannot but be careful. The point, however, is that no matter how thoroughly the procedures are adhered to and appearances maintained, there will be no escaping from controversy in matters such as a strategic sale of the national carrier. Utmost political will will be required to see it through.

Evidently, Air India's own problems - its less than satisfactory financial position, its aging and meagre fleet, its appalling productivity record, the alleged interference in its day-to-day working by its controlling Ministry, the internecine disputes among its top management, the recent suspension of its Managing Director - all add to a poor image and certainly to a lower valuation. However, in the final reckoning, mere accounting numbers which a valuation exercise captures will not be able to counter the strong emotional arguments that will be used to block or delay the sale. It is important therefore for those in charge of its divestment to have a vision for Air India post-strategic sale, a vision in which it is seen to climb back to its past glory, with the help of its new strategic partner. Welcome measures such as granting employees stock options will help in reducing the level of controversy. The crossing of administrative and procedural hurdles are important but, in the overall scheme, they matter less than the need to inculcate a vision.

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