POLICY WATCH – DISINVESTMENT OF AIR INDIA




INTRODUCTION

- The group of ministers led by Union Home minister Amit Shah has approved the plan to invite expression of interest for the disinvestment of state-run career Air India.

- The national carrier has been making losses for long and as a part of revival efforts the government has decided on its disinvestment. The central government was unable to find a bidder last year when it wanted to sell a 76 % stake in Air India.

- Struck with a debt of around 60,000 crore the airline has been making losses to the

tune of 20-25 crore rupees everyday.


INSIGHTS

Last time Air India gave the reason was that government want to retain the stake of

24%. Another reason was high debt of Air India.( The amount is bit higher, debt of Rs. 60,000 crore would be transferred to SPV.) - Air India- the basic problem is that the leadership issue has not been addressed properly.

- Between 2012 to 2015, one of the best operating environment for the industry,

where the fuel prices were lowest and Indian economy was also growing at a fast rate.

- Till 2007. Air India and Indian Airlines both were making profits, there orders were

placed for buying aircrafts and bulk order was placed. The finances work not commensable to the purchase of fleet and slowly the interest kept on rising, from where slowly Air India got into debt trap.

- At one hand, they were not able to service their interest cost at other social welfare.

- Being private Airlines is also not a step to success, example:- Kingfisher and Jet

Airways, infact the liability of Jet Airways and Kingfisher in ratio of the assets they own is much have been with Air India.

- The kind of infrastructure India has is the best in terms of maintenance and ground

support compared to others. - Government denied to support Air India and Air India must come out with

operational as well as financial efficiencies.


- At operational and financial aspects efficiency have been achieved by Air India as compared to previous year.

- What kind of work force and how much the workforce will retain, that will be the

call taken by the new investors. As far as workforce from government point of view, government has decided that the job condition and service conditions will be owned by new investors.


Other challenges about privatisation of Air India- International situation is important:-


1. Basic problem is constant boil of Middle East, the fuel prices are helding high

and by the time this is not reducing, some of the other trouble starts.

2. Taxation level on services.

3. India is no longer a premium market to invest, what it was for 25 years ago.


- In past the objectives to make Air India fly and to make it more vibrant. There

was leadership problems and decision making problems.

- Air India is giant in excel. Air India is only career which has the capacity to

become world's player in terms of International Corporation. It has a heritage and reputation, which can be improved by privatisation. Example Turkish airline which was unknown with limited base, today it is one of the largest player single handled.

AVIATION SECTOR IN 2020 When Jet Airlines went out, the number of aircrafts in Indian aviation sector reduced roughly to 100 but just within a span of few months, all those aircrafts may be taken on lease by some other airlines and within few months, the number of aircraft were same or even more. So, the aviation sector there was some temporary dip in it and now the growth is taking place.

Free Resources

Preparing Mains 

UPSC Mock Test

Daily Reading

Join Us