Strategic Disinvestment of Air India
Union Cabinet has granted “in principle” approval for the strategic disinvestment of the national carrier Air India and its five subsidiaries.
The government has constituted a five-member panel headed by finance minister Arun Jaitley for deciding on the process of privatising Air India. The other senior ministers in the panel include Union ministers Nitin Gadkari, Suresh Prabhu, Piyush Goyal and Ashok Gajapathi Raju. Air India privatisation may start from December.
The mandate of the committee is to finalise the structure and procedure of privatising the debt-laden Air India. The panel will decide on how much stake will be divested and whether a foreign company can bid or not. It will take a final call on how the airline’s unsustainable debt will be treated and on the demerger and strategic disinvestment of three profit-making subsidiaries. Air India has three profit-making units, namely, international carrier Air India Express, ground-handling unit AI Transport Services and AI-SATS, a ground-handling JV with Singapore Airport Terminal Services.
Need
Air India has reported a net loss of Rs 3,587 crore on revenues of Rs 20,526 crore in 2015-16.
Since 2011-12, despite infusing Rs 24,000 crore of taxpayer money as equity support into Air India, the domestic share of the carrier has fallen from 19% to 13%.
The accumulated debts of the carrier have increased to around Rs 50,000 crore.
Arguments against Disinvestment
There are many sectors and routes which the private airlines may not be interested in flying as they may not find them economical to operate.
In some situations, it is necessary to carry out emergency evacuations of Indian nationals from other countries due to natural hazards, political instability or wars.
Way Forward
It is suggested that to make private airlines operate in uneconomical routes, special incentives or subsidies can be granted to airlines operating on such routes.
The government can establish a specialised agency under the Defence or External Affairs Ministry for evacuating Indians from foreign countries.
The government should not restrict the eligibility criteria for the bidders. A company like Indigo should not be denied an opportunity just because it has a 41% share in the domestic market. Any possible abuse of dominant position by any airlines can always be addressed by the Competition Commission.
