Maharaja for sale

The challenge now for the government is to make Air India an attractive buy

By: Editorial | Updated: March 30, 2018 12:10:38 am
The challenge now for the government is to make Air India an attractive buy With its current domestic market share at just over 13 per cent, the government simply has no reason to stay invested in this so-called national carrier

The stage is set for the privatisation of Air India, with the Narendra Modi government inviting expressions of interest for acquiring 76 per cent stake in the state-owned airline. The move couldn’t have come sooner, for a company with accumulated losses of Rs 46,805 crore and outstanding debts of Rs 48,781 crore as on March 31, 2017. The objectives behind privatisation are primarily two-fold. The first is to allow consumers to benefit from competition, which is what liberalisation did by opening up sectors such as telecom, aviation, banking, insurance, power and oil to private companies. The second aim is to ensure that taxpayers’ money is put to better use, which would mean the government exiting all businesses that are loss-making and not serving any tangible social goals either. The post-1991 period has largely seen only the first kind of “sectoral privatisation”. No government, barring the previous Atal Bihari Vajpayee-led NDA regime during 1998-2004, has seriously attempted company-level privatisation — “strategic disinvestment”, as it is called.

In Air India, the case for outright privatisation flows precisely from its inability to withstand sectoral competition. With its current domestic market share at just over 13 per cent, the government simply has no reason to stay invested in this so-called national carrier. The same logic applies to BSNL and MTNL, which together account for hardly a tenth of the country’s total telephone subscriber base that has soared from under three crore in 2000 to 117.5 crore now, mainly courtesy private players. There could be a compelling case for an NTPC, ONGC, IOC, SBI, LIC or BHEL to remain state-owned, as they have not only held their own against private competition, but continued to be profitable and dividend-paying entities. The likes of Air India, BSNL, Scooters India and Hindustan Newsprint, on the other hand, must be treated the same way as Bhushan Steel, Binani Cement, Lanco Infratech or Alok Industries. They should be sold to any investor who sees value in acquiring and running them, or, alternatively, liquidated and their assets disposed of in order to pay creditors.

Air India, thankfully, has certain strengths — an operating fleet of 138 aircraft, an extensive network connecting around 54 domestic and 94 international destinations (including through code share agreements with foreign carriers), prime landing/parking slots and, above all, brand equity — that serious industry players might want to leverage. The government must lose no time in enabling that, while being open to even restructuring or reducing the airline’s debts to make it an attractive buy.

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