The privatization of the loss-making Air India
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he Narendra Modi government would do well to accept its think-tank Niti Aayog’s recommendation for the privatization of the loss-making Air India. This will not only be a big relief for the exchequer, which the airline has been draining for quite some time but also boost the government’s image, for the move will be a big reform.
The national carrier has a debt of around Rs 60,000 crore, of which about Rs 21,000 crore is related to aircraft purchase and Rs 8,000 crore working capital
The Aayog’s latest report comes on the heels of Finance Minister Arun Jaitley’s support for Air India’s sale. In a DD News interview last week, he had said, “There are many private airlines like Jet Airways, IndiGo, GoAir. If 86 per cent of the aviation market can be handled by the private sector, then 100 per cent can also be handled by the private sector.”
The Times Of India (May 31) reported that a decision on the future course of action would be taken by the cabinet. This will make a lot of sense, as ‘the national carrier’ has a debt of around Rs 60,000 crore, of which about Rs 21,000 crore is related to aircraft purchase and Rs 8,000 crore working capital. Niti Aayog has favored waver of loans worth Rs 30,000 crore.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]he think-tank has also recommended that the real estate assets, including prime properties in Mumbai’s Nariman Point and some posh Delhi localities like Vasant Vihar, be hived off into a separate company and then the entire stake be offered to a strategic partner.
It is solely up to the government what it wants to do with Air India
“The airline has accumulated losses of about Rs 40,000 crore and has projected a cash deficit of Rs 3,000 crore for the current financial year with a gap narrowing to around Rs 1,700 crore annually in the coming years,” the TOI report said.
“Although Air India reported operating profit of Rs 105 crore in 2015-16, it is not seen to sustainable given that the annual interest burden is estimated at around Rs 4,000 crore.”
The government has already sunk Rs 25,000 crore into the airline over the last five years and is required to provide a similar amount in the coming few years, the report added.
[dropcap color=”#008040″ boxed=”yes” boxed_radius=”8px” class=”” id=””]T[/dropcap]his means that running the airline makes absolutely no sense for the government. But selling it is unlikely to be an easy job. As Civil Aviation Minister Ashok Gajapathi Raju candidly said on Wednesday, “There are hardly any bakras [sacrificial lambs] around, so to get one is difficult and businessmen are businessmen. There are limitations. One thing is for sure, the taxpayer’s money cannot be committed for eternity.”
Quite apart from the horrendous financials of the airline, there is the problem of the highly unionized employees. They had raised a stink when the Atal Bihari Vajpayee regime tried to privatize Air India. They got a lot of support from the Opposition leaders, especially from the Left. Then there were Swadeshi fossils within the extended saffron family that were, and are, opposed to any economic reform.
Thankfully, the situation is much different today. Modi doesn’t heed to the views of the Opposition; he is even more disdainful of the Left’s viewpoint. As for Swadeshi elements, they know that it is better to lodge a pro-forma protest rather than go the whole hog to get their retrograde agenda implemented; for Modi, unlike Vajpayee, gets along very well with the RSS top brass.
In short, it is solely up to the government what it wants to do with Air India. If the government remains committed to the principle that the taxpayer should not make the sacrificial lamb for ‘the national carrier,’ it can get rid of it. So, it should privatize it, if possible, or shut it down, if necessary. As a state-owned entity, Air India should not be allowed to exist.
1.The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.