Air India selloff falls to earth

There have been sporadic strikes protesting privatization reforms, like the general strike that crippled Mumbai in April

By CNN's Alex Frew McMillan in Hong Kong

NEW DELHI, India (CNN) -- Singapore Airlines has pulled out of the running to buy a stake in India's international carrier, Air India.

With its Indian partner the Tata Group, Singapore Airlines was the only bidder left in the process, so the decision throws India's efforts to sell part of the airline into disarray.

It also casts a cloud over the government's broader privatization program.

Singapore Airlines was "surprised by the intensity of opposition to the privatization of Air India from various quarters including certain sections of political groups, trade unions and of the media," it said in a release.

The company said Saturday that had led it to scrap its bid.

Air India's unions had demanded that workers keep all their benefits. There have also been sporadic strikes this year to protest the privatization reforms of Prime Minister Atal Behari Vajpayee's government.

Labor unions and nationalist politicians claim that opening India to multinationals will mean job losses in India.

Tata Group looking to Delta-Air France

Singapore Airlines had been cooperating with Tata Sons Ltd. to bid for 40 percent of Air India. The Tata Group conglomerate founded and ran Air India until the government took it over in 1953.

Singapore Airlines said it hoped to turn Air India around. But it will instead focus its attention and financial resources on its Australasian aviation investments.

The overall slowdown in both airlines and economies around the world also played into the company's decision not to push ahead.

The Tata Group is now talking with Delta Airlines and Air France on a three-way combination to buy the Air India stake, the Times of India reports.

Government far off $2.6 billion target

Delta and Air France initially withdrew from the Air India bidding because they could not find an appropriate local partner.

The Indian government is left with few other options. The other serious bidder for the Air India stake, the British-based Hinduja Group, already withdrew, after legal complications.

The Indian government has seen its efforts to sell off stakes in government companies stall. It is trying to meet a self-set target of $2.6 billion from privatizations.

But the government is far from that tally, and often misses targets.

Efforts to sell off part of Videsh Sanchar Nigam Ltd. (VSNL), India's monopoly international phone provider and leading Internet service-provider, have also been hit by bidders pulling out.