May 31, 2023

Privatizing Air India Might Succeed This Time

By Ashwini Agarwal
First publised on 2020-12-16 07:03:02

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After a number of false starts, including the last attempt to sell which resulted in not a single bidder coming forward, it seem that the government will finally get Air India off its back. The changed terms in the bidding process have attracted multiple EOIs, including one from the Tatas and another from some employees of the airline.

This is an excellent development. It should have happened a lot earlier. But the government had erred in the past by putting too many conditions for bidders and not wanting to let go of 100 percent ownership of the airline in the past. This time around, the airline along with its subsidiary Air India Express is up for 100 percent disinvestment. Added to this is 50 percent ownership of Air India SATS Airport Services. The government has now transferred Rs 29,464 crore from the huge debt run up by the airline to a special purpose vehicle and allowed the potential bidders to account for the rest while valuing the business.

Air India has been a drain on the exchequer. It ran up debts of Rs 58,256 crore till the end of FY 2019. With the pandemic having a severe impact on airlines this year, this figure must have ballooned further. Hence, any disinvestment process must be pragmatic enough to account for this and give breathing space to the bidders. Along with this, the government must also look into the matter of the employees and ensure they get a fair deal.

Whoever wins the bidding process and takes control of the airline will get huge ready-made infrastructure, licenses and permits. Hence, if the terms are good, the bidders will quote the price at which they will be comfortable to buy and run the airline. The government must be pragmatic in the next stages too and sell the airline with minimum fuss to get funds that can be productively used in other welfare schemes or infrastructure projects.