The sale of the loss-making national carrier Air India to the Tata Group is a move that evoked a mixed response. While some hailed it on the assumption that it would no longer spell a further loss to the exchequer, its opponents felt that a national asset was being sold at a throwaway price without transparency by the Union government.
On October 8, 2021, the Union government announced that Tata Sons was the winner of the bid for the airline for a consideration of ₹18,000 crore; the Tatas would retain ₹15,300 crore of Air India’s debt and pay ₹2,700 crore in cash to the Government. The seller, the Government of India, would retain a liability of ₹46,262 crore that was transferred to a special purpose vehicle, the Air India Asset Holding Ltd (AIAHL) — thereby passing on the liability to individual tax-payer citizens. Thus, what was technically sold was just aircraft routes/landing rights and some core assets of Air India, and not Air India per se.
The sale of an enterprise is different from the sale of its assets (otherwise known as ‘asset sale’), where in order to unlock the value of assets, liabilities are retained by the seller either by himself or through a special purpose vehicle, and assets are sold for a competitive price, as otherwise, the liabilities will surpass the value of the assets, rendering the enterprise value to negative. This is the norm in many corporate transactions.
