Saturday, July 01, 2017

Say Goodbye, Finally, to Air India as We Know It

The government has, for the record, taken a decision to “divest” in Air India, and that too “in principle”. But what is clear is that it is willing to go the whole hog, privatise the national carrier by retaining a minority stake or not even that. All options are on the table and a committee headed by union finance minister Arun Jaitley is going to look at them.

The BJP-led government has been able to do this for several reasons. It has a clear majority in the Lok Sabha, is confident of political support across the country, does not have too much of a constituency among the airline’s trade unions (these will be the only groups which will raise their voices against any attempt at privatisation) and has at best only a pragmatic approach towards public ownership. Correspondingly, the national opposition is in disarray. The Congress, which has a legacy stake in the public sector, and also the Left parties which have an ideological commitment to it, are in dire straits.

The problem about Air India is not even its past, negative as it is, but the future. As for the past, it has huge accumulated losses of over Rs 50,000 crore, an equally gargantuan debt of about Rs 55,000 crore and an unbearable annual interest burden which eats up a fifth of its revenue. Naturally it is loss making.

If Air India could have been turned around under the same system then it would have been by now. In 2012, the-then UPA government approved a nine-year turnaround plan for over Rs 30,000 crore and put in an equity of Rs 6,750 crore. Plus, there was cash infusion to meet the cash deficit (simply not having cash to keep running from day-to-day) and guarantee for loans taken to purchase aircraft. Yet, there has not been any dramatic improvement in health.
01/07/17 Subir Roy/The Wire