The Telegraph
Since 1st March, 1999
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Airlines off selloff list
- Staff bidding in PSUs allowed, rules relaxed for SCI

New Delhi, April 15: The Cabinet Committee on Disinvestment (CCD) today decided to allow PSU employees to bid for their own companies when put on the block. It also decided to remove the two national carriers Indian Airlines and Air-India from the selloff list to facilitate their fleet expansion and revival.

At least 15 per cent of the total strength of the PSU or 200 employees, whichever is lower, can get together to bid for the PSU being put up for sale, the CCD decided here today. Employee bids will be exempted from the turnover criteria but will have to fulfil the net-worth criteria which is normally set to establish the bonafides of any bidder.

The CCD meet decided that employees can either bid independently or in partnership with banks, venture capital firms or financial institutions by forming joint ventures or special purpose vehicles, with majority control in employee hands, though they could contribute as little as 10 per cent of the financial bid. However, they have not been permitted to join hands with any corporate group as ministers felt they could be manipulated by the corporate group by using them as its proxy.

If the employee bid is not the highest bid, it could still be considered if it is within 10 per cent of the highest bid. If there are multiple bids by rival employee associations or co-operatives, then the highest among them would be considered, disinvestment minister Arun Shourie told newspersons. Employee bidders who manage to buy out their own company will, however, not be allowed to sell off their shares during the first three years after the sale.

This decision comes on the back of the government being unable to sell off several of the PSUs it had put on the block. These included Praga Tools, Bharat Leather, Hindustan Cables and Scooter India.

The CCD meeting also decided to take an in-principle decision to temporarily delete Air-India and Indian Airlines from the sell-off list. This is being done as the finance ministry has insisted that without such a formal decision it would be unable to stand guarantee for the dollar and euro loans the two airlines plan to run up in buying new aircraft.

Air-India will be placing orders worth $ 2 billion for ten long-range planes with an option to pick up another seven, financial bids for which closed today. The two planes which are in the fray are Boeing 777 ER and Airbus 340. The airline has also decided to call for financial bids for 18 short-range, medium capacity carriers to be used mainly for the Gulf and South East Asian routes. The two planes in competition here too will be B737-900 and Airbus 321.

Sources said because of the engineering facilities built up and as the government had already decided in favour of Airbus for a large Indian Airlines order, Air-India was likely to favour a larger induction of Boeings. Indian Airlines wants to buy 43 planes in all. These would be a mix of Airbus-319s, Airbus-320s and Airbus-321s to be delivered over four years between 2004 and 2008 at a cost of over Rs 10,000 crore.

The meeting also decided to rope in more potential foreign buyers by relaxing bidding norms for the Shipping Corporation of India. The disinvestment ministry feels it needs to relax the norms which allow foreign firms to pick up just 25 per cent stake in SCI, out of the 51 per cent being put up for sale. Foreign firms can now bid for the entire 51 per cent stake in SCI.

There were murmurs of protest from the petroleum ministry against the CCD's decision to allow higher foreign ownership as SCI carries about 60 per cent of India's oil cargo strategically, the most important cargo for the nation.

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