Editorial Notes

[Editorial Notes] Making Air India’s disinvestment work

The Centre is firm on its plans to privatize various state-run companies including BPCL and debt-ridden Air India.
By IASToppers
December 05, 2019

Contents

  • Why it was in news?
  • Introduction
  • Why did Air India fail?
  • Government’s effort
  • Conclusion

Making Air India’s disinvestment work

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Why it was in news?

  • Recently, the government has decided for disinvestment of public sector units like Air India, Bharat Petroleum Corporation Ltd (BPCL), Container Corporation of India (Concor), and The Shipping Corporation of India (SCI).

Introduction

In the late 1990s, the government recognized the gradual decline in the Air India airline’s service standards and referred it to Disinvestment Commission of India, which recommended dilution of government ownership to 40%. Had the disinvestment efforts succeeded, Air India would have today been a professionally managed successful airline.

air-india

In 2017, NITI Aayog recommended disinvestment but the government decided to not only retain 24% equity, it also wanted the Air India to absorb a major part of the non-aircraft related debt.

Why did Air India fail?

  • Post 2004, Air India’s descent occurred due to
  • Series of reckless decisions, like acquisition of aircraft in numbers far more than what it could afford or gainfully deploy
  • Merger with Indian Airlines
  • Air India allows foreign airlines to dominate the Indian skies.

Government’s effort

  • Government has provided INR 30,000 crores package, intended for period 2013-2021. However, it has not helped Air India evolve into a robust carrier.

What is needed to uplift Air India?

air-india-1

  • Induction of a professional management with an effective leadership,
  • A sound financial package without political interference in its day-to-day operations,
  • Unions allowing changes in work conditions and pay packages

Argument against Air India’s disinvestment

  • Air India is India’s glorious past. Air India has helped in Operation Raahat (evacuation of Indian citizens from Yemen during the 2015 military intervention by Saudi Arabia).

Arguments in favor of Air India’s disinvestment

  • Currently, only 1 in 9 passengers patronized Air India. This could become 12 in next three years as capacity augmentation is undertaken at an unprecedented way by private airlines which cannot be matched by Air India. Hence, Air India can be easily marginalized, if not disinvested.

Conclusion

One sincerely hopes that the disinvestment exercise this time is thought of wisely, pursued with determination, and is successful, because with it is linked the prospect of transforming Air India into a robust carrier.

 

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