Now that the government has laid out broad contours of the strategic disinvestment for Air India (AI), one thing should be clear to all naysayers.
In intent, at least this government is serious about giving up majority control in a business, which has only been accumulating losses and guzzling taxpayers’ money for years.
The political significance of AI divestment should not be lost on anyone – no past government had sufficient will to tame this white elephant, given stiff opposition from employee unions and politicians themselves.
If the sale does get concluded before the ruling NDA government’s term ends, it would irrevocably establish this government’s reform credentials.
The preliminary information memorandum (PIM) unveiled on March 28 shows 76% stake in Air India is on offer, with substantial debt taken off. Also, loss making subsidiaries such as engineering services and the hotel business will be hived off, making the pie more attractive.
The government intend to offer 76% stake in Air India, 76% in international low cost arm Air India Express and 50% stake in the ground handling joint venture AISATS.
It is obvious that the “legacy” debt has been taken off and only that portion, which is partly backed by assets, remains. Of the almost Rs 33,392 crore retained debt, some analysts say more than half is backed by owned aircraft assets. This means contrary to popular perception, the debt burden being passed on to the eventual buyer is even lighter than perceived. So is the opposition right in alleging a scam? Is it correct in saying the government has sweetened the deal?
Fools rush where angels fear to tread. Perhaps the opposition, the Congress and the Trinamool Congress, which have already begun making allegations regarding the disinvestment, need to study Air India’s books first.
Even BJP’s own Subramanian Swamy, who has quickly introduced the word ‘scam’ for AI disinvestment in a tweet, seems to be jumping the gun. It is all very well to have a socialist mindset and oppose any move to get private parties into the public sector, as long as large scale unemployment could be the result or the government were actually gifting away a ‘crown jewel’ to India Inc.
Air India is neither a jewel nor does the disinvestment automatically mean significant job losses. The government will guarantee job security in one form or the other (though the PIM does not specify details); Minister of State for Civil Aviation Jayant Sinha has already spoken of ESOPs for employees and possible retention for one year.
Burden for the government
As for the financial state of the Maharaja, the PIM clearly states that ‘carried forward’ business losses stand at Rs 32,194.2 crore and unabsorbed depreciation at Rs 31,805.7 crore. This could mean that debt (even after much of it has been hived off) could be higher than Rs 33,382 crore stated as of now. Why should the government continue to carry this burden on its back?
AI has guzzled more than Rs 25,000 crore equity since 2012. If it were to continue being a public sector entity, what is the guarantee that more debt will not be taken to remain sustainable as inefficient babus would then continue to run the airline? No, the socialistic mindset of retaining all public sector enterprises – whether profitable or not – does not work anymore.
The government has rightly bitten the bullet on AI privatisation. It is now for the Opposition to suggest better ways of going through with the sale. Perhaps it can begin by asking why the government has been hesitant on exiting the airline completely and why does it want to retain even minority control? Or what valuation is expected with the substantial debt that still lies on the airline’s books? The Opposition’s endeavour should be successful sale, not making wild allegations.
Sindhu Bhattacharya is a journalist based in Delhi.