- The Air India, once the pride of the country’s aviation firmament, was in the red for decades barely able to breathe with the help of a generous dole out of the Union Government is well known. It is also well known that efforts were afoot for long to sell the hugely loss-making entity for quite some time. However, none of the suitors were found adequate or met the expectations of the Government to own up the mantle. After concerted efforts, finally, there is something to cheer about vis-à-vis divestment of Government hold on an economically unviable enterprise. And guess who is the suitor entrusted to carry forward the legacy? Tata Sons, the holding company of the Tata group which started the airline last century, has won the bid to take over the body.
PC: IANS
- For the uninitiated, who I feel will be minuscule, this homecoming of sorts comes almost 90 years after it was first founded and 68 years after nationalization. Air India has finally come a full circle. Tata Sons won the bid to buy out Air India, Air India Express, and a 50% stake in Air India SATS. The Tata group, which already has a stake in two separate airline firms, valued the enterprise at Rs. 18,000 crore, about 39% higher than the reserve price estimated by the Government of India. Make no mistake, the most prominent takeaway from the sale is the resoluteness and pragmatism shown by the Government. As you are aware, a botched attempt to sell a majority stake in Air India in 2017 came a cropper owing to avoidable rigid stand adopted back then.
- Thankfully, the current privatization exercise, which kicked off in January 2020 was underpinned by a realistic assessment of the situation. As mentioned above, Air India incurs losses of about Rs. 20 crore a day and has been kept afloat only through Government guaranteed debt to offset a negative net worth of about Rs. 32,000 crore. Given the situation, the pragmatism shown by the Government in the form of retaining Rs. 46,262 crore of debt to sell the airline deserves to be acknowledged. Note that the debt will be paid off partly by selling the airline’s non-core assets such as real estate. Mind you, the past experience suggests that opposition to privatization is often encountered by the worried employees.
PC: India Spend
- Most hearteningly, a sensible deal has been struck on this front too as jobs will be protected for at least a year with the promise of a VRS if downsizing is later deemed necessary. Further, the Government will protect post-retirement medical benefits as well. With the toughest entity like Air India off the way, the Government needs to press ahead with the privatization of the relatively easier ones like BPCL and the IPO of LIC. No denying the fact that public finance has to adapt to society’s changing needs. And the privatization of unwieldy entities precisely supplements such policies. As such, the Government of India deserves fulsome credit and hopefully, Air India will make the country proud again in the coming days.
