The recent pilot's strike in Air India has once again brought into focus the state of our state-owned enterprises (SOEs). The fundamental problem is the lack of policy clarity towards SOEs.

The rationale in the Nehruvian era was to establish industries as SOEs because the private sector was incapable of running them, given its own frailties.

This made SOEs complementary to the private sector in the country's development and modernisation agenda.

Subsequently, the rationale was changed for the Indian state occupied the 'commanding heights of the economy'.

TRAPPED IN TRANSITION

This model brought in its wake the economic stagnation of the 1960s and 1970s, from which the economy broke out only after the reforms of the early 1990s. The share of the private sector increased across the entire economy.

There was unfortunately no intellectual effort to provide a rationale for SOEs in the dramatically changed domestic and global context with the demise of the Soviet Union, the emergence of Chinese form of social capitalism and the growth of a dynamic domestic entrepreneurship.

Since 1991, most of our SOEs have continued to exist without a clear sense of national purpose, with the threat of privatisation and creeping disinvestment hanging over them.

Air India, like other SOEs, suffers from this fundamental existential malady. It is not only unfair but disingenuous to expect AI to perform satisfactorily under such circumstances.

The fact that NTPC, ONGC, BHEL, GAIL, EIL, SBI and some others continue to turn in sterling performances, despite this mortal handicap, is only a testimony to individual brilliance in some cases, prevalence of hidden or overt subsidies, or the government implicitly guaranteeing their survival.

AIR INDIA'S PLIGHT

It is, therefore, gratifying to note that Mr Vayalar Ravi, Union Minister for Civil Aviation, has announced his commitment to make a success of Air India. Fortunately, he has not limited his options of achieving this success within the framework of public sector ownership and management.

Both options, of privatising Air India or handing over the management to a private sector strategic partner, would now be on his table. Should Air India be kept afloat simply because it is the so-called national carrier? A sick national carrier does not bring any glory to the country. Other domestic carriers which are now well known globally do the country equally proud.

Even if the airline were to be privatised but maintained its iconic Maharaja symbol and name, it would for all practical purposes still be seen as India's national carrier. Government departments would no longer hold back payment of their dues to the company.

At present, Rs 800 crore has been held back for payment of VVIP duties and Rs. 200 crore is owed by the defence department.

The airline will not be at the beck and call of our political leaders and senior officials, with schedules being changed and passenger reservations being cancelled because of the exigencies of official travel. These factors rendered Air India an undependable carrier, its market share sinking to a pitiable 15 per cent in April 2011 despite the airline having the largest fleet by far.

COOPERATIVE OPTION

No short-term or patchwork measures will now suffice. All these have been tried earlier and without success. The airline has to be run as a modern corporation, freed from the burdens imposed by its 14 trade unions, the false assurance of unlimited support from the Exchequer and a management that has virtually zero accountability for its performance.

Outright privatisation is perhaps impractical in the given political conditions. A way forward could be to make the airlines a cooperative venture of all its employees with the government giving it the initial thrust by restructuring its debt.

The employees' cooperative could join hands with a strategic management partner and link its own remuneration from the company to its actual performance. There seems to be no other way forward. It may even be better to shut down the airline till such a solution is put in place, instead of incurring a loss of Rs 57 crore each day.

(The author is Director-General, Ficci. The views are personal. >blfeedback@thehindu.co.in )

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