With the measures decided by the Cabinet Committee on Economic Affairs, Indian Airlines begins the long haul to privatisation and robust health. Change is not about to occur overnight or dramatically but in phases over the next few years. The important thing is that the need for a drastic overhaul is recognised and the process has begun in keeping with the scheme recommended by the Kelkar Committee. It has been decided in principle to bring down the government's holding to 49 per cent and to sell 40.4 per cent of the stake to the public and the rest, 10.6 per cent, to the employees. The achievement of that goal will still leave the government as the major shareholder but one that will necessarily be more sensitive to the market and the interests of other shareholders. An equity stake in the corporation will, in theory, concentrate employees' minds on improving productivity and profitability rather than competitive internal bargaining as has been the case so far.To get from here to there requires a majorfinancial restructuring of the domestic airline. It is seen as essential to nurse it back to financial health beginning with an injection of new capital to raise its share capital from the present Rs 105 crore to Rs 922 crore in the first phase of restructuring. The additional equity contribution from the government announced on Monday of Rs 325 crore gives IA a headstart. And the two-year waiver of outstanding dues means new funds can be deployed productively. The rest of the capital is expected to be raised from internal IA resources through sale of assets, loans and contributions from employees. On the face of it, the injection of more public funds would appear to be exact reverse of disinvestment and privatisation. However, IA's finances have been badly mauled during the decade by such factors as the ill-advised merger of Vayudoot, competition from leaner private sector airlines and delays in freeing management from the heavy hand of government, not to mention persistent trouble with its employees. Freshcapital from the public exchequer at this juncture for the restructuring/expansion of fleet and operations is unavoidable. Man-power rationalisation will have to keep pace. All going well, Indian Airlines will then look like a serious airline ready for privatisation and the mobilisation of funds from the market through an initial public offer of equity or other means.However sound the blueprint may appear, there is always the risk of it going askew. It could end up as another money-guzzling operation if politicians and bureaucrats do not curb their instinct to interfere with the management. To guard against all the things that could go wrong during implementation, it is essential to have in place an effective board and professional managers and then to leave them alone to carry out their functions. Management reform is a key aspect of privatisation which clearly must be carried through at an early stage. The success of the whole restructuring plan depends critically on the IA's level of performance duringphase one.
