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.
Note:
1.The views expressed here are those of the author and do not necessarily represent or reflect the views of PGurus.
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Author of this article has a consistent view on the issue of state involvement in commercial businesses.We have examples of PSUs some way better than the other.Some still run with excellent efficiency with minimal govt. investment.BHEL,NTPc,BEL are all well run enterprises which has benefited the country.But then we have white elephants where rampant corruption has rendered them basket cases.But then what is the reality of private enterprises?Almost all which require huge amount of funding,have made govt. totally corrupt.2G is an excellent example.Entry of private airlines has made state run Air India to give up its lucrative routes at throw away prices to the shady JET Airways /Spicejet.This happens in india because the courts are run on tinpot lines where the corrupt can show the finger to one and all and runaway.Almost all private operators have massive bank loans obtained thro’ devious ways from PSU banks.So my argument is there is no easy way out.PSUs can function excellently if the state is honest and private too can perform if the state is transparent and level playing to all.Unless the state is cleaned up of corrupt bandicoots masquerading as officials in the pocket of corrupt politicians,nothing much will change.Public money will get looted.Author to me sounds too naive and dogmatic.
As per book “A Feast of Vultures” it is already believed quite credibly that some of popular airlines in India are shadow-owned by some politicians cutting across major political parties. Adding to that now Air India would also be sold out(all these voices of mounting debt/loss,poor service add nicely) to become one more shadow owning enterprise in Aviation sector. Great. Mera Desh Badal raha hai.Aage Badh raha hai.
Al those who r advocating reform theory .kindly enlighten us which prvt airline in India not under pressure..Air India was created in 1953 since then till 2005 it reported profit paid dividend on the very marginalcapital base…All these thugs are stooges of prvt airline…
My plea to Govt. Of India – Do not waste taxpayers hard earn money for the benefit of few. : mostly employees and Govt. Officers.It is not even fit to be sold, it is scrap already.
Please sell at the earliest . During my last visit to India, i had to use Air India for my last leg of travel. Baggage got damaged – was taken by Air India’s rep as it was considered beyond repair Yet to get my compensation even after nearly a year. Professional thieves
Did you get compensation or not don’t keep in suspense.