Monday, Dec 05, 2022

‘Landmark in economic policy’: Why Air India deal could signal a new takeoff

Senior officials said the Air India sale will help push other tough decisions the government is keen on taking.

Air India planes are parked at Indira Gandhi International Airport in New Delhi, India, Monday, Aug. 30, 2021. (AP Photo/Manish Swarup)

The privatisation of Air India is a message from the Government to the markets and global investors that it has the political will to bite the reform bullet.

Its demonstrative effect gets amplified because Air India was always a hard sell given its colossal losses and debt despite continuous infusion of funds.

The process was a labour of nine months for officers in the Union Finance Ministry who encountered multiple obstacles, and had to shed the “over-conservatism” that is typical of bureaucracy, said an official involved in the process.

Speaking to The Indian Express, Finance Secretary TV Somanathan said: “It is an important landmark in the evolution of our economic policy.”

Officials said a transaction as “tough and complex” as Air India’s in an open, transparent and competitive bidding process, will boost future privatisation.

“Definitely, there will be a fillip because bidders will get more confidence in the government’s capacity to close transactions,” said Tuhin Kanta Pandey, Secretary, Department of Investment and Public Asset Management (DIPAM).

Senior officials said this sale will help push other tough decisions the government is keen on taking. “Even during Covid, the government took decisions to set the stage for India to take a leap as and when economic activities revived,” the official said.


What helped the government was the Tata Group’s interest to get back the airline it originally operated. Officials claimed they were driven by financial considerations — the best bid from whichever party. But a senior BJP politician said the party was happy the national carrier is going to a group that is “rooted in history and has a legacy”.

“This makes it easy to sell the decision politically,” the politician said, not wishing to be named.

Not surprising that no one among the Opposition Congress and the Left — a traditional opponent of privatisation — has so far reacted unfavourably. In fact, former Congress minister Milind Deora said in a tweet that other loss-making PSUs continue to drain taxpayers’ hard-earned money and get abused and fleeced in the name of social welfare.

The Air India sale, which comes on the back of Moody’s upgrade in the outlook for India’s rating to stable from negative, should not be seen in isolation, said officials.


In the last couple of months, several decisions such as a guarantee to the bad bank and willingness to convert its outstandings with private telecom companies into equity suggest the government is keen to push ahead in sync with market realities.

Even while working on the Air India deal, the government felt, at one point, that shutting down the airline was the only option if the current bid failed.

DIPAM Secretary Pandey described the deal as a “resurrection for the airline, which would have collapsed under its weight of accumulated losses, of minus Rs 44,000 crore of net worth”.

A senior retired bureaucrat who was involved in the Air India disinvestment process said on the condition of anonymity that this time the government had kept itself open in terms of what the bidding parameters would be, which is why there were so many changes to the conditions throughout the process.

“There was a strong will from the political leadership to privatise the airline. Had it failed this time, the next proposal would have been to close it, simply because it was unsustainable for the taxpayer to keep bailing it out,” the bureaucrat said.

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First published on: 09-10-2021 at 03:51:01 am
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