Air India sale signals centre’s commitment towards reforms
Air India’s 20-year steeplechase to find itself a worthy suitor has ended. On Friday, the government declared Tata Group as the winning bidder, ending the national carrier’s jilted bride status once and forever. This is also the country’s first strategic privatisation in decades and renews India’s attempts at being a market economy in spirit and substance. The nation gives thanks. Privatisation is the lifeblood of a market economy and the Air India–Tata deal sends firm signals to investors about the government’s commitment to reforms and confirms privatisation of other loss-making entities like BSNL and MTNL.
It’s amply clear that nationalisation, whether it’s banks or airlines, has left entities battered or bankrupt. Air India has been in an existential despair despite a `1.1 lakh crore whip-round from taxpayers since 2009. It was operationally inefficient and suffered in silence against private competition, racking up losses of over `62,000 crore. Both for the NDA’s sake (which promised privatisation) and the country’s, selling Air India shifted from a policy option to a bare necessity. For years, governments have been cutting the air carrier a cheque as if they were unavoidable grocery bills. They aren’t. With privatisation, such obligations will cease and taxpayers don’t have to chip in a dime.
Agreed, Tata’s $2.4 billion bid is less buck and more whiz-bang, but until recently, few were hopeful of a deal. The sale gives a personal boost to Prime Minister Narendra Modi, indicates the government’s determination and also helps meet the FY22 disinvestment target, which had collected not one red cent. It reinforces the momentum of privatisation in contentious sectors including petroleum, insurance, railways and shipping. But above all, one of the notable aspects was the government’s willingness to go the distance and sweeten the pot for potential buyers such as hiving off losses to other entities, changing valuation norms, promising to indemnify buyers against contingent liabilities and payment of certain contentious employee dues. Continuity of such an approach will help us avoid hanging on to our loss-making PSUs and save the nation from further economic ruin.