Air India disinvestment sale… Selling out India? At what cost?

Govt through cabinets nods to allows 100% ownership by NRIs in the Air India through FDI.

Govt through cabinets nods to allows 100% ownership by NRIs in the Air India through FDI.
Govt through cabinets nods to allows 100% ownership by NRIs in the Air India through FDI.

The Government of India has been desperately trying in the last 5 years to sell Air India. On Wednesday it allowed NRIs to own up to 100% stake in Air India.

Why is the government trying to get rid of Air India, just when it appears to be turning the corner? On Wednesday, the Union cabinet gave the nod to allow 100% ownership by Non-Resident Indians (NRI)s in Air India. This is the culmination of a series of attempts by the government in the last 5 years to dis-invest in Air India. The latest cabinet decision is surprising and seen as a desperate measure to once and for all sell off Air India.

By allowing 100% for NRIs in the National Carrier through a Cabinet nod, it is trying to pass on the investment as Domestic and safeguard violation of Substantial Ownership and Effective Control (SOEC) norms. The SOEC is an international standard norm that the Govt enforces on the airline industry. The country where the Airlines is headquartered should be fully or majority-owned by that country’s Govt and balance by its citizens.

This will give the wrong signal by the Govt. in its fight against Black Money, corruption and crony capitalism

Quid pro quo?

According to the present norms which were altered during the UPA regime, 100% Foreign direct investment (FDI) is permitted in scheduled domestic carriers, subject to certain conditions. One is that it would not be applicable to overseas airlines. There are a lot of fine details in the Terms and Conditions in the stakeholding ownership pattern to be adhered to. A Public Interest Litigation (PIL) on the Airline scam is already in the Delhi High Court. The Supreme Court too is hearing an ongoing case against 4 Airlines for its malpractices, Money laundering, stakeholding patterns, dubious partnership, route sellouts, etc. This is separate litigation, a ticking timebomb ready to explode any minute on the Indian Airlines industry.

A government notification recently came out with a Preliminary Information Memorandum (PIM) for Air India disinvestment. It has proposed selling Air India fully along with the profitable Budget airline Air India Express and it’s 50% stake in Air India SATS Airport Services Private Limited (AISATS), a 50-50 joint venture with Singapore Airlines.

Is the money being brought in clean?

With potential buyers not seen around nor interested, the Cabinet nod at the eleventh-hour of the Strategic disinvestment process appears to be a weak and ill-advised strategy. Trial and Error methods will further lead to disaster. Most likely, this decision will be challenged in court. Now with this cabinet nod for 100% NRIs holding this raises a serious question, if someone somewhere is being accommodated to buy out Air India? A couple of names are already doing the rounds. Govt should ensure that the whole process is transparent and only money that has been earned legally should be allowed to buy it. NRIs funding to be allowed through FDI might be seen as Black Money finding its way back into India through various channels. This will give the wrong signal by the Govt. in its fight against Black Money, corruption and crony capitalism. The Sale of Air India will not be that easy and wait for a full-blown action in court from certain Corruption Crusaders.

What is needed?

What Air India requires today is a good management team to handle its affairs as an autonomous corporate entity without any Govt interference. Instead of a sell-out, the best option available is to create Air India as a corporation with a 51% stake by the Govt Of India and list 49% stake through an Initial Public Offering (IPO) for Indian Nationals. Privatisation is a sellout and is a game by some vested interests to grab the airlines.

Natraj Shetty

6 COMMENTS

  1. why is it so important that air india should be owned by govt or by indians etc? In 1946, air india was owned by tatas. Subsequently it was nationalized by gobbling up some other airlines also. Nothing useful or important has happened since 1950’s owing to the nationalization. Its not as if air india has been flying to mayurbhanj in bihar thanks to “increased public servicce” or whatever.
    The fact is that airlines is treated as luxury travel in india and govt taxes the crap out of airlines. The only “benefit” of govt ownership we get is that ministers and officials can fly or upgrade for free and the airline can be stuffed with employees who have bribed the ministers like ajit singh etc for a position as a AI staffer

  2. Air India is in miserable state. It doesn’t even make money to serve its debt. It is totally mismanaged. During my last flight from London to Delhi, they were rude and fighting with everyone. It’s highly overstaffed. And on top of it nobody wants to buy it. How long the Govt will fund it from tax payers money? And it’s not the Govt’s job to run airlines.

  3. No one is asking the govt to run a business. That should be left to the individual boards of the psus consisting of professionals. What is being said is Don’t give PSUs to bussiness houses, because India’s private sector is bungling it’s act every day. The latest is yes bank. If a strict audit by the CAG that happens to PSUs is ordered for private sector, I’m sure the economy will be 5 trillion dollar DEFICIT economy. It is just that the private sector bad loans are brushed under the carpet and to hide it every one resorts to PSU bashing

  4. In no free market economy governments run air lines. For that matter any businesses. Therefore it is high time Air India is disposed of for whatever its worth to save tax payer money. Swamy is wrong to say that it is family silver. After all he also human and to err is human. BJP can show it is different only by promoting free market economy on the lines of Rajaji’s Swatantrata Party. Narasimha Rao and Vajpayee succeeded in this to some extent and Modi suddenly became die hard socialist out to ruin economy. With his solid majority he could have down wonders by freeing up the economy from the clutches of mindless bureaucracy.

  5. This airline should have been sold long back. It’s only catering to the people entitled to free tickets at the cost of the tax payer. How hypocritical and strange that anyone mindful of tax payer interest would not want to ensure it was sold off to a private entity ages back.

  6. This whole episode of disinvestment of Air India looks like, the Government wants to show 5 Trillion $ economy is achieved? Will the amount received in this manner be included as a part of Indian Economy?

LEAVE A REPLY

Please enter your comment!
Please enter your name here