Union Finance Minister Arun Jaitley on January 31, tabled the Economic Survey 2016-17, and one of the key points was the call for more privatisation in Civil Aviation and other sectors with an aim to further the economic reforms process. The Economic Survey has put across the issues in privatising public companies also in the case of enterprises which are believed to belong to the private sector. Will Air India, which has been floating on a Rs 30,000 crore bailout package from the central government, lead the pack in the privatisation in the civil aviation space?
On the privatisation process in India, the Economic Survey says, “India is now squarely in the middle of the emerging market pack. This is partly because India has allowed the private sector entry into, amongst others, civil aviation, telecommunications, and financial services.” It added, “These have all served to reduce the share of the public sector even if there have not been many exits of the PSU enterprises themselves.” Meanwhile, according to data present in the Parliament, Air India has made borrowings of more than Rs 51,000 crore till March 31, 2015, which is over five times the debt which the infamous Kingfisher Airlines had.
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On the issues related to privatisation, the Economic Survey says that the ambivalence is manifested in “…reform in the civil aviation sector, which has been animated as much by an interventionist as liberalising spirit…” It added, “…signs of a political dynamic that would banish the ambivalence toward the private sector and property rights have not been strongly evident for decades.” Meanwhile, Air India has been saddled with a debt of Rs 46,570 crore, including aircraft related loans worth Rs 15,900 crore. A bailout package for 10 years was approved by the earlier UPA government, 5 years back in 2012. Currently, the money which has already gone into the airline is said to be Rs 24,000 crore.
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In the recent fiscal year, AI reported operating losses of Rs 246 crore and Rs 461 in their respective quarters. The BJP government had said in the Parliament that the company’s operating losses for the first quarter in 2016-17, which the target was an operating profit of Rs 87.28 crore.
On the difficulties in privatisation of public enterprises, the survey says that the symptoms of the ambivalence are manifested in several ways. On the civil aviation sector, it says that even if history suggests the opposite there is still an effort to make the continually unprofitable public sector airline as a world class one. It added that “Recently, airport privatisation has taken the form of awarding management contracts rather than a change in ownership. Moreover, policy reform in the sector has been animated as much by an interventionist as liberalising spirit, reflected for example in restrictions on pricing.”
Air India, recently has been a topic of ridicule as it was reported that it is among the worst airlines in the world. A recent report ranked Air India as globally the third-worst performing airline in 2016. According to the Bloomberg report, an aviation insights company FlightStats put together a list of the international airlines with the best on-time performance records for the year.