Air India Disinvestment

What is the issue?

Indian government is planning for a disinvestment of Air India.

What does Disinvestment mean?

Disinvestment can be defined as the action of an organisation (or government) selling or liquidating an asset or subsidiary.
A company or a government organisation will typically disinvest an asset either as a strategic move for the company, or for raising resources to meet general/specific needs.
Earlier NDA government (1999-2004) made four strategic disinvestments in

What is the need for Air India disinvestment?

The airline had reported losses for six straight years.
Air India’s debt, now about $8 billion, is growing unsustainably.
It was bailed out with $5.8 billion of taxpayer money in 2012.
More than 18,000 workers were on its rolls for a fleet of just about two dozen planes.

What are the reasons of failures of air India?

Inefficiency, typical in a government-controlled set up, was bleeding Air India.
The business had a global as well has domestic competition.
This business was not profit oriented and not expected for high returns.
Role of politicians in using the airlines for the personal use.

What is the status of Air India disinvestment?

The sale bid earlier shelved prematurely after all the bidders were either disqualified or dropped out.
The many factors that were and may still be at work against the sale are not widely understood.
In May 2000, bids were invited for a 40% stake in Air India, with a cap of 26% on foreign investment.

What can be done?

The negotiation conditions need to be lowered by the government.
Reliable Partnership can be formed for the proper working of the carrier.
The government should be clear that foreign airlines should not gain control over Air India.
Sharp scrutiny of objections can expose and frustrate hidden vested interests of the bidders.
The government will have to exit the airline cleanly and completely.
The reform demands political courage, economic wisdom and business-like sharpness.

Source: The Hindu