For sale, again!
Monday saw the Union government invite bids, once again, for sale of the country's national carrier, Air India. In its second attempt, the Centre has widened the offer by putting out its 100 per cent stake on the table. The deal also includes the government's complete share in two of Air India's subsidiaries — low-cost international carrier Air India Express and ground handling arm AISATS. In order to make it even more lucrative, the Centre has offered to absorb the carrier's liabilities amounting to Rs 40,000 crore. The renewed offer from the Union government comes after its first attempt failed to attract a single private player in May 2018. While there is a significant improvement in the deal with Minister of State for Civil Aviation Hardeep Puri confident about brimming interest, the deal mentality suggests a certain rush to get rid of the national carrier. Earlier, the government wanted to hold 24 per cent of stake in Air India but the renewed offer suggests an intention of complete riddance. The only real 'headache' that one can understand from the published figures is the outstanding liability of Rs 32,474 crore that includes debt of Rs 23,286 crore. A glance at carrier's assets also makes Air India a lucrative offer for prospective buyers. With 146 aircraft, 50 per cent market share of international operations served by Indian carriers, 4,400 and 3,300 national and international airport slots respectively, Air India amounts to a significant and strategic asset. So strategic that the Union government might not have to sell it at all had there not been very convincing reasons. But it is really the perspective which shall urge the government to make such a decision. A discontent opposition has already flagged its concerns over the government deciding on selling the "family silver", their dissent begs for a second thought. But paying no heed to it, the government has put out the expression of interest (EoI) for potential buyers to respond by March 17. Air India's debt has been no secret. Back in March 2011, Air India had accumulated a debt of ₹426 billion (US$6.0 billion) and an operating loss of ₹220 billion (US$3.1 billion), and was seeking ₹429 billion (US$6.0 billion) from the government. But a report by the Comptroller and Auditor General had pinned the decision to buy 111 new aircraft and the merger with Indian Airlines for the ill financial health. Interestingly, the idea of privatisation was floated back in 2013 by then Civil Aviation Minister Ajit Singh. But the opposition comprising BJP and CPI(M) had severely criticised the government of the day. Ironically, the same BJP on June 28, 2017, approved the privatisation of Air India. Either BJP mindlessly criticised the UPA government for even thinking of privatising the national carrier, not taking cognisance of the situation in any capacity, or it realised its mistake in opposing the idea and therefore, opined on doing it anyway. BJP of 2013, while offering dissent over the privatisation, wanted to ameliorate the situation and not proceed to get rid of one. Contrasting itself, it does not want to solve the carrier's outstanding issues that have created a mountain of debt. And, quite expectedly, we have the Congress in opposition, raising concerns over the proposed privatisation. The only difference is an enigmatic Subramanian Swamy who has vehemently expressed his discontent with his own party's privatisation proposal. Food for thought.
In the name of being the national carrier, and having a government hand on it, Air India deservingly enjoys majority market share and preference slots across the country. India has also endorsed Air India on the international front and national carriers are anyway considered important when comparing it with other private carriers. If the government can endorse the carrier's features to attract bids, it can surely delve into financial rearrangements to alleviate it from the perpetual crisis. The decisive question is whether it is prudent to sell the national carrier. The aviation industry has been perturbed in general as seen from recent bankruptcy of Jet and Kingfisher but IndiGo's skyrocketing profit — a threefold increase in profits — reserves hope. Disinvestment of national assets can provide much-needed short-term gains but whether it will be good in the long run is what must be pondered. In the current financial scenario, it may seem lucrative to sell off Air India but the decision might come back to haunt the government. The renewed offer sums up the deliberations done on the Centre's part but is it the right step? Failure to rescue our national asset out of the financial crisis does not augur well and repeated sale of national assets that hold significant strategic value might be a new low for India.