NEW DELHI: India's conglomerate Tata Group has emerged as the frontrunner to acquire debt-stricken Air India as the government looks to close one of its most ambitious disinvestment projects, sources revealed. The India government is yet to formally approve Tata's winning bid, but people with direct knowledge of the matter said the Mumbai-based conglomerate has placed the highest bid - over $1.029 billion (Indian rupee 5,000 crore) more than SpiceJet promoter Ajay Singh, who participated in his individual capacity in the bidding process.

Tea-to-steel Tata Group confirmed two weeks ago that it had submitted a bid to buy debt-crippled national carrier Air India, which it owned decades ago before the airline was nationalized. The Indian government has sought to sell its entire stake in the ailing company, setting a deadline for bids for Wednesday after failing previously to secure any interest for a majority share.

A senior government official said that once the winner is announced, the share-purchase agreement will be signed with the winning entity within 15 days, and the transfer process will begin immediately afterward. Representatives of both bidders were called for meetings on two occasions earlier this week, during which the share-purchase agreement was discussed to help them take a long-term view of Air India's various liabilities, and plan the funding accordingly.

The Civil Aviation Ministry issued a preliminary information memorandum in January 2020 seeking an expression of interest, kicking off the process of disinvestment. A key change from the government's earlier attempt to sell Air India in 2018 was that it said it would offload 100 percent of its stake, compared with 76 percent earlier. The stake sale includes Air India's 100 percent shareholding in AI Express Ltd, and 50 percent in Air India SATS Airport Services Private Ltd.

An official announcement is likely to come after the Air India Specific Alternate Mechanism (AISAM), a group of ministers headed by Home Minister Amit Shah, ratifies the winning bid. Other members of AISAM are Finance Minister Nirmala Sitharaman, Commerce Minister Piyush Goyal, and Civil Aviation Minister Jyotiraditya Scindia. Tata already has investments in airlines AirAsia India and Vistara.

SpiceJet did not respond to an AFP request for comment. The secretary of the government's investment and public asset management department, Tuhin Kanta Pandey, confirmed bids had been received. "Process now moves to concluding stage," he tweeted Wednesday. Tata Group in 1932 pioneered commercial air travel in India with Tata Airlines.

Once known affectionately as the "Maharaja of the skies", the airline was later taken over by the government and rebranded Air India. But it has been haemorrhaging money for more than a decade, incurring billions of dollars in debt and losing market share to low-cost rivals in one of the world's fastest-growing, but highly competitive, airline markets.

Apart from Air India, the government also plans to raise billions of dollars through the privatization of Bharat Petroleum and a share sale of a major insurer. In August, New Delhi said it was seeking to lease state-owned assets to the private sector to raise six trillion rupees ($81 billion) to repair public finances battered by the pandemic and fund new infrastructure. - Agencies