Pri­vati­sa­tion Chal­lenges

SP's Aviation - - TABLE OF CONTENTS - —By Air Mar­shal B.K. Pandey (Retd)

THE IN­DIAN MEDIA IS abuzz with the news on the long stand­ing is­sue of pri­vati­sa­tion of the state-owned flag car­rier Air In­dia, some­thing that has of­ten been a sub­ject of pub­lic de­bate as well. In or­der to un­der­stand the is­sue of pri­vati­sa­tion of the air­line, it would be necessary to delve briefly into the past.

The ori­gin of the na­tional car­rier dates back to 1932 when the renowned In­dian busi­ness ty­coon JRD Tata who was also an avi­a­tor, founded a pri­vate car­rier Tata Air­lines. Post World War II, it was up­graded to a pub­lic lim­ited com­pany and was re­named as Air In­dia. In 1948, the Gov­ern­ment ac­quired 49 per cent stake in the air­line. In 1953, sub­se­quent to the pro­mul­ga­tion of the Air Cor­po­ra­tions Act, the Gov­ern­ment ac­quired ma­jor­ity stake in the air­line. The air­line was then re­named as Air In­dia In­ter­na­tional and was ded­i­cated to op­er­a­tions on the in­ter­na­tional seg­ment. As a part of this re­struc­tur­ing process, flight op­er­a­tions in the do­mes­tic seg­ment was as­signed to In­dian Air­lines which was also state-owned. The first ma­jor pri­vate air­line in In­dia thus be­came a pub­lic sec­tor en­tity and that is when its trou­bles be­gan to take root.

The na­tional car­rier was af­flicted by the ills nor­mally associated with the pub­lic sec­tor that re­sulted in cu­mu­la­tive losses. In the year 2000, an at­tempt by the Ministry of Civil Avi­a­tion (MoCA) to pri­va­tise the na­tional car­rier did not find favour and hence was aban­doned. Air In­dia suf­fered the sec­ond ma­jor blow in 2007 when it was merged with In­dian Air­lines to form a sin­gle en­tity Air In­dia Lim­ited. The com­bined losses for Air In­dia and In­dian Air­lines at the end of the fi­nan­cial year 2006–07 stood at ` 7.7 bil­lion ($120 mil­lion). Af­ter the merger which has all along been a sub­ject of con­tro­versy, the losses by March 2009 by the newly formed Air In­dia Lim­ited, went up nearly ten times to ` 72 bil­lion ($1.1 bil­lion). In or­der to keep the na­tional car­rier afloat, in March 2012, the gov­ern­ment pro­vided life sup­port through mas­sive in­fu­sion of funds to the tune of ` 32 bil­lion ($500 mil­lion).

In 2012, a study com­mis­sioned by the Gov­ern­ment rec­om­mended that Air In­dia should be partly pri­va­tised. The fol­low­ing year, the MoCA ad­mit­ted that pri­vati­sa­tion was the key to the sur­vival of Air

In­dia. How­ever, all at­tempts by the MoCA so far at pri­vati­sa­tion of the state-owned air­line have been frus­trated by political in­ter­fer­ence, im­ped­i­ments cre­ated by the unions as also a lack of en­thu­si­asm amongst po­ten­tial buy­ers. To­day, the debt bur­den on the na­tional car­rier stands at ` 520 bil­lion ($8 bil­lion), some­thing that may prove to be an in­sur­mount­able ob­sta­cle.

While there has been mar­ginal im­prove­ment in the per­for­mance of the na­tional car­rier, Air In­dia con­tin­ues to be a heavy bur­den to the tax payer. This sit­u­a­tion has ex­isted for some time, but is no longer ten­able. The Air­line’s market share has pro­gres­sively eroded to a pal­try 13 per cent in­di­cat­ing its inability to com­pete with the far more ef­fi­ciently man­aged pri­vate car­ri­ers. As the Gov­ern­ment has now em­barked upon pri­vati­sa­tion of the ail­ing pub­lic sec­tor units in the coun­try, Air In­dia ought to right­fully fig­ure high on the list. This view has been en­dorsed by the Niti Aayog as well.

The In­dian Com­mer­cial Pi­lots’ As­so­ci­a­tion (ICPA) in which Air In­dia pi­lots have a size­able rep­re­sen­ta­tion, has con­veyed their sup­port of the move by the Gov­ern­ment to pri­va­tise the na­tional car­rier with the pro­viso. The ICPA is not averse to part or com­plete pri­vati­sa­tion of the air­line if done fairly. How­ever, there is fresh trou­ble brew­ing as there is stiff op­po­si­tion to the move by the Em­ploy­ees Union of the na­tional car­rier. The Union has de­scribed the pro­posal by the Gov­ern­ment to pri­va­tise the na­tional car­rier as “uni­lat­eral and ar­bi­trary” and has threat­ened to launch a cam­paign to op­pose the move. The Union has also ap­pealed to all the stake­hold­ers to forge a com­mon plat­form to spear­head the ag­i­ta­tion. It is quite ob­vi­ous that the em­ploy­ees of the na­tional car­rier would not like to be evicted un­cer­e­mo­ni­ously from the com­fort zone of the state-owned en­ter­prise that they have been ac­cus­tomed to for years.

The sig­nals em­a­nat­ing from the MoCA in­di­cate that the Gov­ern­ment is con­fi­dent and de­ter­mined to suc­ceed in its ef­fort to pri­va­tise the na­tional car­rier. How­ever, un­less the Gov­ern­ment finds ways to first neu­tralise the colos­sal debt li­a­bil­ity of the na­tional car­rier, there may not be many tak­ers forth­com­ing to in­vest in Air In­dia.

The sig­nals em­a­nat­ing from the Ministry of Civil Avi­a­tion in­di­cate that the Gov­ern­ment is con­fi­dent and de­ter­mined to suc­ceed in its ef­fort to pri­va­tise the na­tional car­rier.

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