With the Tatas being declared as the successful bidder for the ailing Air India, the national carrier has finally made its way back home to its original address. Interestingly, looking back this disinvestment proposal was in fact, started by the Vajpayee government in 2000-01, when attempts were made to re-privatise the Maharaja.

The airline which was founded by JRD Tata way back in 1930s, flew its first domestic flight from Mumbai to Trivandrum. In 1953, the Government of India passed the Air Corporations Act and took over the reins of the airline much to the anguish of the pioneers in the aviation industry.

The efforts of the Vajpayee government to re-privatise the airline has finally seen the light of the day with the Centre ceding control and announcing the landmark deal in October 2021 and declaring Tata Sons Pvt. Ltd as the new official owner of the Maharaja.

Vajpayee govt’s moves

The Vajpayee government was a strong believer of the gradual withdrawal of the state from non-strategic areas. It believed in the government giving up its pro-active role in economic development and rather be a facilitator by providing an investor-friendly business environment,. Now that dream has come to fruition with the airline finding its new although original address for itself.

At this juncture, it is important to recall the recommendations of the Ramakrishna Committee in 1998 which had suggested disinvestment of Air India during the previous NDA government. Somehow, the so-called national pride delayed the process, resulting in the amassing of a colossal debt for the airline.

With the current government in power also believing that “Government has no business to be in business except in strategic areas” it is key that the nation now focuses on disinvestment in certain sectors such as hospitality etc. where human-touch is crucial and can be better managed by the private sector.

Of course, this ground-breaking deal has had its fair share of criticisms levelled on the pretext that: Is it right to sell the family silver or the so called national symbol of the country?

Always a national pride

However, it is important to bear in mind that irrespective of who owns the airlines it would continue to be the national pride — maybe better shaped in terms of service and efficiency, an outcome of the managerial efficiency of the Tatas with its proven track record of successfully managing Vistara and Air Asia.

Most importantly, with the borrowing burden of the government to fund the colossal debt of Air India getting largely reduced, it would not be a burden on the taxpayers’ money.

To put things in perspective, as on August 31, 2021, the airline was under a mountain of debt of ₹61,652 crore, of which, Tata Sons holding company, Talace Private Ltd. is to assume ₹15,300 crore, while the balance ₹46,262 crore will be taken over by the government’s Air India Asset Holding Ltd (AIAHL). Additionally, the Tata group will also pay ₹2,700 crore in cash to the government.

Also with the nation suffering from the onslaught of the pandemic, there could not have been a more ideal time for Air India’s disinvestment. From the point of view of the government it would have been too much to bear the burgeoning financial loss that too in the background of pandemic-hit public revenue.

A boost to revival

Routing taxpayers’ money towards Air India’s losses and depriving funds for welfare measures as well as infrastructure projects for a country which is at the juncture of economic revival would have been criminal injustice to the general public.

Another point worth noting is that, through this much awaited big-ticket disinvestment, the government has signalled its intention of moving ahead with its economic reforms agenda.

With already a couple of PSUs lined up for disinvestment, on the back of the Air India sale, the government should now go all out and focus on its disinvestment strategy as outlined in its Budget 2021-22 announcement.

The landmark deal has again brought the spotlight on the Modi government’s aggressive reforms agenda and helped in instilling confidence amongst domestic and foreign investors. With macroeconomic indicators already pointing towards economic revival, concluding the disinvestment of Air India has provided an impetus to the whole economy and will only boost the country’s business and economic prospects.

Moreover, Tatas being the successful bidder has provided a positive vibe both on the economy and the government fronts.

Softening the Fed taper

Also, last but not the least, now that the government is back on the reform track it may get foreign portfolio investors to re-think about the potential of Indian capital and domestic markets, especially in the wake of Federal Reserve going ahead with policy rate hike in a year or so.

With a renewed confidence being instilled in the government’s economic policies and agenda and investors being all out positive about the Indian economy, it might help in minimising the downside of the tapering effect. Proportionately, the chances of damage to the domestic economy from the likely capital market crash, depreciation of rupee, worsening current account deficit and crude oil price hike may get lessened.

The time is ripe for the government to move ahead with concrete economic measures in all directions and rapidly work towards achieving its dream of achieving a $5 trillion economy.

Shettigar is Professor and Misra is Assistant Professor of Economics, Birla Institute of Management Technology, Greater Noida

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