One of India’s senior most industrialists Rahul Bajaj mentioned a couple of weeks ago during an interview session with Niti Aayog CEO Amitabh Kant about the poor condition of public sector undertaking Air India.
Reacting to the comments made by Bajaj, Kant was quick to mention how Air India was losing market share and something had to be done about the losses. This was the first indication that Modi government is seriously thinking of divesting from Air India. Last week, it became obvious that the government is moving towards privatising the country’s beleaguered national airline amid stiff competition from no-frills rivals and reported at least seven years of losses.
Sceptics have as usual said how it would be difficult to go through this process and how the debt burden of Air India will be a road block in the process. However, if the government moves towards disinvestment from the airline, it must be welcomed. The government has no business in pumping money into new aircraft acquisition and other expenditure to keep an inefficient white elephant going while there are so many other sectors which need money to be spent on.
Finance Minister Arun Jaitley has said that the civil aviation ministry had been asked to prepare a plan for the government to sell off Air India, which has been reliant on a Rs 42,000 crore bailout since 2012. The National Institution for Transforming India, or Niti Aayog, an influential government policy advisory group chaired by Prime Minister Narendra Modi, “has given its recommendations to the civil aviation ministry which will decide on the process of disinvestment in Air India”, the finance minister said. The Niti Aayog consults with the government on long-term policy. While its recommendation is not binding, the move will trigger a debate about the future of Air India.
Civil Aviation Minister Ashok Gajapathi Raju has supported the idea of Air India to be sold. However, he feels that the country may have trouble drumming up interest in the indebted airline. “There are hardly any investors around so to get one is difficult. “One thing is for sure, the taxpayer’s money cannot be committed for eternity,” he said.
Air India has Rs 14,000 crore short term loans and Rs 35,100 crore of longer-term debt, according to data to the end of March 2015 - the most recent available. The government has faced increasing pressure to privatise Air India following a report from the country’s auditor showing it had understated its operating losses last year by Rs 64,000 crore.
The government’s view seems to be that there is no way Air India can continue like this. Political interference and bad decisions have ruined the airline. Lack of accountability and bad planning has resulted in huge losses. However, some aviation experts feel that it was too early to comment on whether Air India would count in the ambitious disinvestment target of Rs 72,500 crore for 2017-18. If the decision is to sell, the government is confident that a good suitor can be found. But some feel that Air India is still on a strong footing operationally and can be revived. It has a great value in terms of fleet and international routes. Its flight crews and other staff have more experience than domestic competitors.
The big questions to which the government has to provide answers in its policy are whether the national carrier needed to be sold or not, whether the bids would be open to foreign or only domestic investors, whether the Centre should maintain any stake at all and whether the debt can really be cleared first.