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Speed ahead on AI disinvestment

The Centre's decision to allow foreign investment of upto 49% in Air India is welcome as it means disinvestment of government stake in a major loss-making state enterprise. The disinvestment of Air India has long been discussed and the government has often indicated that it wants to do it. But contradictory signals and actions have also been sent out. While the discussion was on, the government infused money into the already heavily debt-laden carrier. The Cabinet Committee on Economic Affairs cleared the disinvestment proposal six months ago, but a parliamentary committee recently wanted the decision to be reviewed. The decision now seems to have been taken finally to go ahead with disinvestment, and hopefully the process will not be stalled again. Air India has been a white elephant and is weighed down by a debt of about Rs 50,000 crore, which is being serviced with tax payers' money. The government has no rationale for continuing in the civil aviation business when private airlines have over 85% of the market. Air India is in no position to compete with them. It has incurred losses year after year and offered less than par service to its customers. The loss for the current year is likely to be about Rs 3,600 crore.

A 49% foreign investment in Air India has the potential to bring the airline on a competitive footing with other airlines. The decision might pave the way for some major private airlines who have foreign partners to bid for Air India. Some of them have already expressed interest. The high debt will be a put-off for any potential bidder, although the government is to take on itself a good part of it, but Air India's large number of international long-haul routes and big fleet of aircraft are major attractions.

Air India is staff-heavy and the unions have always opposed disinvestment. The government is considering a proposal to relocate some staff to other public sector enterprises and to offer a voluntary retirement scheme to those who are willing to accept it. Modalities of the stake sale are being finalised by a group of ministers. But disinvestment will not be an easy process and it is still not certain that it will be achieved. If it does go through this year, it will also ease the government's financial position. With only a few weeks left for the current fiscal to end, the government has realised less than 30% of its already low disinvestment target of Rs 15,000 crore. The fiscal deficit target has already been overshot. In these circumstances, the government must speed ahead with the disinvestment process and ensure that it is completed as early as possible.

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