Economy

Disinvestment of Air India: More Than Just Revenue

Disinvestment of Air India: More than just revenue

The union cabinet has approved a long-standing demand on the reform checklist i.e. the Disinvestment of Air India. The airline over a period of time had become a burden on the already debt-ridden balance sheet of Government of India. This money can be utilized to fund social and infrastructural programs of the government.

Air India No Longer a Maharaja

Today Air India has become a bleeding carrier with a market share of just 14% and a debt of Rs.55,000 crore approximately. The airline is surviving on a bailout package of Rs.30,000 crore spread over 10 years. This bailout package was announced by UPA Government in 2012. Since then money has continually been injected to revive this airline. NDA Government has continued with the annual equity infusion in Air India.

According to International Air Transport Association (IATA), India shall displace the UK to become the third largest aviation market by 2026. Air passengers in India are growing manifold year on year. It is estimated that by 2035 passengers will grow to 442 million. Air India has surrendered profitable routes to private airlines.

The Strategic Alignment

The government has set a disinvestment target of Rs 69,500 crore this year. This includes the realization of Rs 41,000 crore from selling the stake in enterprises where the government will still hold majority shares i.e. more than 51% and remaining Rs 28,500 crore from by selling equity in those enterprises where the government will be a minority shareholder. While there has been a recommendation for the government to exit the airline, another possible route is giving a majority control to a private player and receive a premium. Later the government can reduce its stake further through a public issue.

It is now high time that divestment is not seen as an option to cover for short-term fiscal gains; instead, it should be a part of a strategic plan to improve the production of goods and services in India. The strategic sale of Air India can be critical in reviving the fiscal outlook of Indian economy and would help the government to channelize this money in the infrastructural and social programs that shall enable it in meeting various welfare goals.

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