Indian airline sale delayed again

Air India needs new planes

India's cabinet has cancelled the privatisation of Indian Airlines and Air India so the government can increase investment to make them more attractive for a future sell-off.

"We have to make our own investments to ensure survival of the airlines," Aviation Minister Shahnawaz Hussain said.

He said lack of interest from investors had forced the decision.

"After the September 11 attack in the US, hardly any international airlines were in a position to buy," said Mr Hussain.

The airlines have been scheduled for privatisation for more than three years.

More investment

The cabinet decision on Tuesday will allow the government to go ahead with a plan to buy 60 new planes for the airlines.

Neither airline has modernised their fleet for almost 20 years and both have lost market share.

"The finance ministry told us that if we needed investments of around 200bn rupees (£2.7bn; $4.2bn), then the airlines had to be taken out of the list of state firms being privatised," Mr Hussain said.

The board of Indian Airlines has decided to buy 43 new Airbus planes for $2.1bn, but the purchase needs government approval.

Air India is expected to make a decision in the next 10 days on buying 18 150-seater aircraft, which are expected to cost about $1.9bn and for which Boeing is tipped as the favourite.

More privatisations

The cabinet also reopened bidding for the sale of a 51% stake in state-owned cargo carrier Shipping Corporation of India (SCI) after previous bidders proved too inexperienced to run the operation.

Disinvestment Minister Arun Shourie said foreign firms could now bid for the entire 51% stake, instead of the 25% allowed in the failed privatisation.

A 51% stake in Rashtriya Chemicals & Fertilisers will also be sold.

India has forecast it will raise 132bn rupees in revenues from privatisations in the current financial year to March 2004.