Tuesday, July 04, 2017

Air India Privatisation: Lessons from the Past

The decision to privatise Air India (AI) is absolutely well-timed. A large swathe of the Indian middle-class is increasingly impatient at having to foot the bills for excesses and corruption of politicians, policy-makers, bankers and others. Let’s face it; we have been carrying the burden of this white elephant for a long time without realising it, since bailout funds released by the exchequer cannot easily be correlated to increased taxes.

The government has decided to set up a committee, headed by finance minister Arun Jaitely, to explore disinvestment options for Air India and its five subsidiaries and decide the quantum of divestment (100%, 74% or 51%). The Tatas, who founded and built AI into a top airline (only to have it nationalised by prime minister Nehru in 1953) are, naturally, front-runners to acquire the now bloated and troubled airline. However, it is important that the National Democratic Alliance’s (NDA’s) mistakes (in 2002) should not be repeated this time around.

For starters, AI owns prime properties around the world which need to be liquidated to reduce its gargantuan debt burden of Rs52,000 crore and make it more attractive. AI has been making losses for a decade and is living off a Rs30,231-crore bailout sanctioned by the United Progressive Alliance (UPA) government in 2012. Nearly Rs24,000 crore of this has been disbursed without even a plan or effort to reduce the debt burden. Over time, its market share has shrunk to 14% of the domestic traffic and 17% of the traffic from India.

The UPA government was primarily responsible for pushing AI deep into the red through the reckless purchase of aircraft. The Central Bureau of Investigation (CBI) is understood to be investigating those deals. But three years after the NDA has taken charge, there is still no attempt to cut costs, shed assets and reduce the taxpayers’ burden. Consider this. As recently as May 2017, the Times of India reported that AI had floated a Rs3.5 crore tender to convert its iconic building at Mumbai’s Nariman Point into an art-museum to house its precious art collection which, apparently, includes the works of VS Gaitonde,
04/07/17 Sucheta Dalal/Moneylife