India shelves Air India sale plan after failing to attract buyers

India has shelved its sale of Air India after failing to attract buyers, local media quoted a government minister as saying – a decision that could exacerbate the carrier’s financial woes and representing a setback for government efforts to cut debt.

Civil Aviation Minister Suresh Prabhu said plans to privatise the carrier have been dropped for now due to factors such as the looming election and high oil prices, according to Times of India which cited news agency PTI.

The decision to call off the sale is a highly disappointing reversal of the government’s earlier commitment to privatising the national carrier, consultancy CAPA India said.

“Under continued government ownership, with no clear roadmap, Air India is likely to see its domestic and international market shares decline over time to a point where the carrier is no longer relevant,” it said.

The money-losing carrier, which employs some 27,000 staff, said this month it was seeking a short-term loan of $148 million so it can continue day-to-day operations.

CAPA India estimated the carrier would make losses of $1.5 to $2 billion over the next two years alone, adding it represented an unnecessary drain on taxpayer funds in an industry that is well-served by private operators.

Selling the state carrier was key to Prime Minister Narendra Modi’s plans to help keep the fiscal deficit at 3.3 percent of GDP, a goal already under pressure from giveaways to farmers and other welfare benefits ahead of a national election in 2019.