The Air India plane flying the inaugural trip from Lucknow,
The Air India plane flying the inaugural trip from Lucknow, the capital of India's Uttar Pradesh, approaches to land at Najaf International Airport in the central Iraqi shrine city on February 14, 2019.HAIDAR HAMDANI/AFP/Getty Images

In a major development, the central government has decided to repay major part of Air India's debt which was seen as a key problem in the privatization of the 'Maharajah'.

Centre has raised Rs 22,000 crore through issue of bonds out of which Rs 7,985 crore was raised on Thursday. Moreover, it has also transferred Rs 7,464 crore of local bonds to the accounts of Air India Asset Holdings (AIAHL), which means the overall debt of the national carrier would come down drastically.

As per an Economic Times report, at current levels, Air India is reeling under a huge debt of Rs 58,000 crore.

The central government has been looking to disinvest Air India for a while now. Last year in March, the government had issued preliminary information memorandum kicking off Air India's disinvestment process.

After not receiving any bids, the government was eventually forced to defer the strategic plan to sell its 76 percent stake in the airline. The biggest problem for the buyers was the ballooning debt of Air India which would now be halved by the Center.

The government has been eyeing to sell Air India along with low-cost international subsidiary Air India Express and its 50 percent stake in ground handling company Air India Singapore Airport Terminal Services Ltd (AISATS).

Further, it also has planned to separately sell its subsidiaries, including regional airline Alliance Air, Air India Engineering Services Ltd (AIESL) and ground handling arm Air India Air Transport Services Ltd (AIATSL).

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Air Indian Express

One of the government officials on conditions of anonymity said, "These decisions have been taken, as it is going to be the same as last year and there is no change in the format. We had a target of raising money at a coupon rate of less than 8 percent and our rates have been below 7.5 percent in all the three phases."

The Air India board is scheduled to meet on October 22 to finalize the consolidated account statement for 2018-19, which will kick-start the process of divestment. The government is likely to issue fresh Expressions of Interest (EoI) in November.

Further, if the reports are to be believed, the centre may go for the complete exit from the airline along with cutting down working capital and allowing future owners to fire employees after a period of one-year post divestment.

Another official said, "Airline business should not have working capital debt, as airlines fund their working capital debt through earnings from the sale of tickets for future travel. The government is looking at a model to reduce working capital debt but the final approval is to come from the ministerial committee."