Sunil Jain, on July 10, 2017, wrote a profound piece (goo.gl/xQ9wkH) on the proposed Air India sell off in this newspaper. He began by asking a question is Air India worth Rs 5 lakh crore as I had indicatively valued it in my column (goo.gl/P6u3Ck) for The Indian Express or, as some others have suggested, its worth is only Rs 1?
Before I deal with the valuation query there are certain other questions that the “morticians” of Air India need to answer. First, what public interest is served by privatising public assets? The global experience of the past 27 years is that it only creates oligarchs and oligarchies.
Second, where is the empirical evidence that private sector can run a better airline. For every one private airline that has been successful since the skies in India opened up in 1992, two have gone belly up. Even the prima donna of private airlines, Jet Airways, is a not much of an experience to write home about. Let me relate a recent experience. On the morning of July 11, I was accompanying the combined opposition candidate for president, Meira Kumar, to Jaipur for campaign. As the web-check-in had failed, I was standing in the boarding queue to collect my economy-class boarding pass, since that is the only configuration ATRs have. The check-in staff was obtuse, rude and arrogant in that order. Their behaviour could make any government ‘babu’ blush with shame.
Third, if public-public partnerships can run utilities successfully across the country, the Delhi Metro Railway Corporation (DMRC) that is jointly owned by the Union government and the Delhi government being a classical example, is the “sell out” of Air India the only solution to its problems? Why can not other ways like the GSTN (Goods and Service Tax Model Network) model not be explored whereby public institutional investors hold 50% of the equity and the remaining 50% is distributed among the general public and employees of Air India? The GSTN equity structure is as follows: Union government 24.5%, state governments 24.5%, HDFC 10%, HDFC Bank 10%, ICICI Bank 10%, NSE Strategic Investment Co 10% and LIC Housing Finance Ltd 11%?
Fourth, if crony capitalists, carpetbaggers and scamsters who are in debt to public sector banks to the tune of Rs 6 lakh crore can routinely have their debts restructured over and over again, why can’t the government bite the bullet and retire Air India’s debt and give it a fresh start?
Fifth, what is the deal and with whom? What happened between the end of March 2017, when the junior minister for civil aviation informed the Rajya Sabha that there is no move to privatise or disinvest in Air India, and Arun Jaitley’s assertion that if private airlines can cater to 86% of the Indian traffic, it can then do 100% too? Why this sudden change of heart? Does the government’s left hand not know what the right is doing, or the consummation has already been been done in the dark and only the motions of a public marriage ceremony are being gone through? These are questions that the Parliamentary Standing Committee of Civil Aviation, I hope, asked the government when it met on July 12—or, of course, these would nonetheless be agitated in the appropriate judicial forum.
Now, turning to the valuation of Air India which has a number of subsidiary companies. Except for two, all others are in profit, including Air India Express that flies the lucrative Gulf routes. That is why there is a proposal under consideration the ‘good Air India’ qua the ‘bad Air India’ paradigm whereby the profitable aspects of Air India are sold to select cronies and the government just winds up the rest of the company in the name non-profitability and cost optimisation, the euphemism of choice to sack lakhs of employees summarily in the private sector everyday.
Sunil Jain argues that it is difficult to value the prime real estate, landing slots, bilateral rights, fifth freedom rights and, of course, the ‘art’ that Air India possesses, and therefore, it should be sold at its ‘enterprise value’ that he has calculated at Rs 14,000 crore. By his recommendation, if the government was to divest 51% and retain 49% to be sold at a later date, then Air India would be hawked off for around Rs 7000 crore. I respectfully disagree.
The real value of Air India lies in its legacy inheritances. In Mumbai alone, it has the iconic building in Nariman Point, plush flats in Bandra and a sprawling complex encompassing hundreds of acres in Kalina. Forget selling them, even if all this real estate is just redeveloped at current FSI (Floor Space Index) being given by the Government of Maharashtra in conjunction with the NBCC or any other public sector construction company, that would be more than enough to retire Air India’s debt. Air India has a sprawling complex in tony Vasant Vihar in Delhi and prime real estate all over the globe.
Coming to parking slots at international airports, some of them are grandfather slots dating back to JRD Tata’s time. A large number of them are not being used by Air India. Some of them would sell at a premium of millions of dollars. Then, there are fifth freedom rights that Air India has on some international destinations that it does not exploit and are no longer available. Their value is simply incalculable, and if properly auctioned, the sky is the limit. Coming to the bilalterals, Sunil is right that they belong to the government, and not Air India; but as the national carrier, and if I am properly informed, Air India has the right of first refusal. Private Indian carriers started using these bilateral rights after Air India said that it did not have the capacity to optimise them in full. It can thus be safely said the whole package called Air India is worth Rs 5 lakh crore, if not more.
Then, there is the larger national security argument. As government retains a toehold in the communications industry through BSNL and MTNL, and in the broadcasting space through Doordarshan and AIR, it must have its own airline also.
Air India, in the past, has come to the rescue of millions of stranded Indians from Kuwait in the first Gulf war in 1990, from Iraq in the second Gulf War in 2003, and Yemen during the current conflict and myriad other places where brave men and women of Air India have flown without fear or complaint.When volunteers were called for to fly the relief air-craft to Kandahar to negotiate with, service and bring back passengers of hijacked IC-814, the whole airline volunteered. Catch a private Airline doing it!
It is fashionable to bang Air India. Let us not throw the baby out with the bathwater. The government should find other ways of turning it around. That is why I began The Indian Express piece with the proverb, “Garib ki joru, sa’ab ki bhabhi”.
By Manish Tewari