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Selloff decision to precede airlines’ fleet expansion

New Delhi, Jan. 15: The Cabinet will soon take a decision on whether or not to privatise the two state-run airlines — Air-India and Indian Airlines.

“We will shortly take a note to the Cabinet to seek its views on disinvestment of the two airlines. Only after that decision is taken, we will proceed with aircraft acquisition,” civil aviation minister Shahnawaz Hussain said here today.

Shahnawaz also said the Cabinet will decide on a plan to develop Delhi and Mumbai airports into world class airports, if necessary, independent of any decision to lease out or rope in private participants for this project.

Hussain does not feel this is the right time to privatise the airlines given the current state of aviation economy where most potential buyers — global airlines — are themselves going through financial crisis and will, in all probability, not be interested in fresh investments overseas. A feeling which seems to have been shared by the disinvestment ministry in the recent past.

The civil aviation minister also feels that the aircraft acquisition decision has to be taken fast. Continued delays on this issue will lead to the two airlines simply rusting away as both have fleets whose average age is nearing 20 years.

The move to lob the airline-privatisation issue to the Cabinet comes after finance minister Jaswant Singh attempted to scupper the plans to acquire new aircraft by pointing out, during a meeting of the Cabinet Committee on Security on Tuesday, that there was already a Cabinet decision to privatise the two airlines.

Singh does not favour the aircraft purchase as his ministry will have to provide a counter-guarantee for the huge foreign exchange loans that A-I and IA will need to buy these planes. His aides feel the government should not take on too many counter-guarantee commitments as this could impact the country’s credit rating.

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