New Delhi: The Union cabinet’s decision on Wednesday for a stake sale in iconic national carrier Air India which may result in its privatization signals the National Democratic Alliance (NDA) government’s determination in its fourth year in office to pursue politically tough reforms.
Privatization of the debt-ridden state airline, which did not turn around despite a restructuring and capital infusion plan implemented in 2012, comes close on the heels of another tough call taken by the government last month to send large corporate loan defaulters to bankruptcy proceedings.
Privatization of state-owned firms, although limited to loss-making companies, is gathering momentum under the NDA regime that otherwise believes in national champions that can take on foreign behemoths. It is currently working on merging state oil companies that can compete globally for hydrocarbon assets with their counterparts. Loss-making public sector units, the government believes, is a drag on the exchequer and will do better in private hands even if they once were the jewels in the state’s crown.
The Department of Investment and Public Asset Management (DIPAM) has in-principle approved strategic disinvestment (ceding management control to a strategic partner) for about 20 other loss-making state-owned firms such as Cement Corp. of India Ltd, Bharat Earth Movers Ltd and Scooters India Ltd.
Other forms of disinvestment include listing of unlisted state-run firms and increasing public holding to meet the 10% minimum public holding mandated by capital markets regulator Securities and Exchange Board of India (Sebi).
“Faster and focused decisions are making the government look dynamic on the reforms front. One could expect momentum in decision making in the fourth year in office of a government," said Jai Mrug, a Mumbai-based political analyst.
Finance minister Arun Jaitley is clearly not in favour of taxpayers endlessly bailing out loss-making state-run businesses. Disinvestment proceeds fetched the exchequer Rs87,714 crore in the last three years of the current regime. It raised Rs45,500 crore from disinvestment proceeds in 2016-17 alone. Privatization of state companies did not take place during the previous 10 years of the United Progressive Alliance (UPA) regime.
Mrug, however, described the NDA government as a welfare-focused one having limits on how far it could proceed on a free market approach to policy making. NDA is likely to consolidate itself over the next two years bringing to its fold new sections of voters, said Mrug. “NDA is the new Congress," he added.
Air India was launched in 1932 by J.R.D. Tata as Tata Airlines. Its name was changed to the current one in 1946. The government decided to take it over in 1953.
In 2000 too, under a Bharatiya Janata Party (BJP)-led government, there was a move to privatize Air India.
The airline has the largest domestic and long-haul fleet of 140 planes in the country and flies to nearly 41 international and 72 domestic destinations.
Apart from the planes, the airline also has vast land holdings, including nearly 32 acres in central Mumbai, besides its iconic headquarters on Marine Drive valued at more than Rs1,600 crore. It also has properties in New Delhi, London, Hong Kong, Nairobi, Japan and Mauritius.
The airline has so far received Rs23,993 crore of the Rs30,231 crore equity infusion promised by the government under a financial restructuring plan in 2012.