Fly Away Now

Vayu Aerospace and Defence - - Commentary -

Jayant Sinha, min­is­ter of state for civil avi­a­tion, is con­fi­dent (that) Air In­dia disinvestment will be com­pleted by the end of this year. This will be a wel­come de­vel­op­ment if it hap­pens and marks a mile­stone in re­think­ing the role of gov­ern­ment in busi­ness. Given its role in mak­ing pol­icy and craft­ing reg­u­la­tory ar­chi­tec­ture, gov­ern­ment has no com­mer­cial role to play in a com­pet­i­tive sec­tor such as civil avi­a­tion. More­over, mis­man­age­ment has led to scarce pub­lic re­sources be­ing ear­marked for a strug­gling air­line. This must end soon.

Air In­dia has re­ceived from gov­ern­ment Rs 26,545 crore as di­rect eq­uity sup­port over the last five years. The re­sult has been un­der whelm­ing and the air­line recorded a net loss of Rs 3,643 crore last year. At a time when In­dian civil avi­a­tion has boomed in terms of pas­sen­ger traf­fic growth, Air In­dia lost mar­ket share over the last three years de­spite hav­ing the big­gest fleet of air­craft. Given this con­text, the best thing pos­si­ble is for gov­ern­ment to cut its losses at the ear­li­est and use its re­sources in ar­eas such as ed­u­ca­tion and health­care.

One hur­dle to early disinvestment ap­pears to be the Rs 48,877 crore debt in Air In­dia’s books. How­ever, this is not as daunt­ing a chal­lenge as it ap­pears at first sight. Around 64% of the debt is work­ing cap­i­tal, or money needed to fund its ev­ery­day op­er­a­tions. Also, gov­ern­ment is open to the idea of break­ing the air­line along its op­er­at­ing arms to fa­cil­i­tate the disinvestment process. These as­pects make it pos­si­ble to con­clude the air­line will be dis­in­vested soon, which will not only bur­nish the Modi gov­ern­ment’s re­formist cre­den­tials but should also lead to the disinvestment of other pub­lic sec­tor white ele­phants – re­ori­ent­ing gov­ern­ment en­deav­our to ar­eas where it is re­ally needed.

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