|CCI to probe AI bond deal|
|Wednesday, 08 February 2012 00:00|
Air India’s proposed restructuring could get into trouble with the Competition Commission of India (CCI) saying it would examine specific aspects of the issue from the point of view of whether it vitiated level playing field concerns. Of Air India’s R18,000 crore of debt, about R11,000 crore is sought to be converted into long-term bonds.
Air India’s debt restructuring had hit a hurdle last week with banks not too keen as this would mean they would have to make greater provisioning in their books. One solution being worked on was for the loans to be converted into bonds that would be guaranteed by the government. The issue is now before Reserve Bank of India which has to take a call on whether such a solution would be acceptable to it.
If the government decides to guarantee Air India’s loans and this allows banks to restructure the loans, the issue before the competition commission would be whether this gives Air India an unfair advantage. After all, if the government were to give the same guarantee for Kingfisher’s loans, its loans could also be easily restructured. CCI chairman Ashok Chawla had said last week he was examining the issue of level playing field.
In the past, when the government infused equity into Air India, Chawla’s predecessor Dhanendra Kumar didn’t believe it involved level playing field issues as all promoters were free to infuse equity into their companies. But given the government finds it much easier to raise funds compared to other promoters, Chawla’s stated position has been that each case has to be examined on merit.
On Tuesday, a group of ministers headed by finance minister Pranab Mukherjee cleared Air India’s debt restructuring package and allowed the state-owned airline to float bonds worth R7,500 crore. The final approval for the proposal, aviation minister Ajit Singh said, would come from the Union Cabinet.