Air India deal will boost sentiments in the capital markets: Meenakshi Lekhi

In 2017, the government had tried to disinvest Air India, as the airline had a mere 14 per cent market share and a debt of approximately $50,000 crore (at present, it is around $62,000 crore). The government remarked that if the private sector could handle 86 per cent of flying, it could well handle 100 per cent. Air India’s debts were a clear burden on the state exchequer, and the government wanted to invest that money in other sectors, such as education and health.

IndiGo had shown interest in acquiring Air India, but things did not work out. It was during the tenure of prime minister Atal Bihari Vajpayee in 2001 that the first attempt to sell Air India was made; only 40 per cent equity was offered then. Initially, several foreign airlines including Lufthansa, Swiss International Air Lines, Air France-Delta, British Airways, Emirates and Singapore Airlines had expressed interest in buying the airline, in addition to corporate houses like the Hinduja group and the Tata group. But when the government clarified that any foreign airline will have to partner with an Indian company to bid, most airlines pulled out. The Tata-Singapore Airlines consortium remained the sole player in the race.

Illustration: Bhaskaran Illustration: Bhaskaran

The consortium was in the advanced stages of the deal and had even completed due diligence, when it dropped out. One of the probable factors was the bombing at Colombo’s Bandaranaike Airport in 2001, in which several of Singapore Airlines’ aircraft were destroyed, causing massive financial losses to the carrier. Also, Air India and Indian Airlines were two companies then, and only Air India—which operated only international flights—was for sale.

Since that failed attempt to privatise, we all know the price we have paid as a nation in terms of the drain that Air India has been on government finances, and, of course, the abysmal service that most of us experienced. So, the recently finalised privatisation of Air India is indeed commendable. The government deserves applause for its determination to go ahead with it. This is even more significant, as it is a 100 per cent sale of the merged entity that comprises the entire domestic and international operations of the carrier.

An efficient model of privatisation of a government undertaking has multiple positive outcomes.

The government is not supposed to be a profit-making body. When a government company is required to focus on generating revenue from its citizens, it is often a failure because of the multiple constraints concerning its public ownership. Even developed countries like Japan and England have privatised their national airlines to increase efficiency. Privatisation ensures better utilisation of resources, and that would eventually benefit customers. Another positive of this privatisation effort is the impact it can have on economic growth, infrastructure development and job creation. The revival of a significant business certainly boosts its entire ecosystem. It eventually would uplift tax collection. Such privatisation efforts will boost the sentiments in the capital markets. Remember the big fillip that our markets had received after the 1991 economic reforms amid a weak economic situation. Creative and constructive initiatives boost the market and give renewed confidence in the broader reform agenda.

This step has underscored Prime Minister Narendra Modi’s commitment to reduce the government’s role in the economy. It also saved taxpayers from paying for Air India’s daily losses.

Lekhi is Union minister of state for external affairs and culture.