Almost a year after the Narendra Modi government announced a strategic disinvestment in Air India, the effort has come to nought. But the premise underlying the policy is correct. Government???s scarce resources and taxpayer money need to be deployed in areas where they can produce maximum benefit for society, such as healthcare and education. Aviation is marked by highly competitive markets which deliver the goods, and there???s no case to stay invested in Air India.
The next step must therefore be to act on feedback from potential bidders and improve the disinvestment process. Only 76% of Air India???s equity was sought to be sold and a stake in two subsidiaries was bundled in. This meant that a bidder would have to deal with debt of a little over Rs 33,000 crore and also 11,214 permanent employees of Air India. With government holding on to a stake in the company, a potential investor could not have had a free hand to deal with a debt laden, loss making airline. This will scare any investor away. As former aviation minister AG Raju had once said no bakra ??? or sacrificial goat ??? could be found to take on the airline.
The only way out for the government is to sell its entire stake in Air India, and on much simpler terms. It can absorb the debt and offer a golden handshake to some employees. This can be considered a one off investment, which would save the government the necessity of haemorrhaging taxpayer???s money every year to keep the cash guzzling airline afloat. Another tweak could be to unbundle the offer to make it more attractive for potential bidders. A successful disinvestment of Air India would also serve the purpose of convincing investors across the board that the Modi government has some reformist mojo left.
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