Start privatisation with Air India

As the government firms up its list of state-owned enterprises that it plans to privatise, the number one candidate must be Air India. The government should privatise the airline, into which it has poured more than Rs 40,000 crore: Rs 24,745 crore as equity support since 2011-12 alone, as per the turnaround plan of 2011-12, which promised a total infusion of Rs 30,231crore over 10 years. Its debt totals over Rs 40,000 crore. The Comptroller and Auditor General finds that the state-owned airline lost over Rs 6,000 crore since 2012-13.

Why should the government of India keep pouring scarce public funds — which would generate far greater economic returns if invested in education, healthcare or physical infrastructure — into an operation that the country’s private sector is perfectly capable of carrying out far more efficiently? The answer is blowing in the jet exhaust. The government should exit the loss making airline. But why should any sane investor buy the stake the government wants to flog?

Mismanagement is only part of the reason for the airline’s travails. It was a badly under capitalised company for most of its existence, and the merger of Indian Airlines and Air India played havoc with morale, operational efficiency and finances. Most of the revenue had to go to service debt. After the government infused large dollops of equity, things have improved. Air India’s employees-to-aircraft ratio has come down from typical Indian public sector levels to globally comparable levels, even if not down to the level of low-cost carriers.

It even claimed to have turned in an operating profit down the line. The state-owned carrier has suffered owing to political interference and gross mismanagement: politicians and civil servants demand and obtain undue privileges, including delaying flights to allow a tardy neta to clamber aboard at the last minute. Once these factors are removed, the airline should be able to run well. The only businesses the government should be in are those that are strategic and beyond the capability of the private sector. Air India does not qualify.

From The Economic Times