‘Air India privatisation will boost confidence in govt’s capacity to close transactions’: CII

The government on Friday announced that Tata Sons is the highest bidder to win back the country’s flagship carrier Air India for ₹18,000 cr

The sale of state-run Air India will help to “embolden confidence” in the government’s capacity to close transactions and encourage bidding in future sales at a time when the government is lagging in its disinvestment plans as only around 5% of its annual target has been met so far, the Confederation of Indian Industry (CII) said on Monday.

The government has received ₹9,110.56 through disinvestment so far against a target of ₹1.75 lakh crore. (HT Photo)

The government on Friday announced that Tata Sons is the highest bidder to win back the country’s flagship carrier Air India (AI) for ₹18,000 crore. This marked an end to its five years of struggle to privatise the debt-laden airline. The transaction is expected to be completed by the end of this year.

According to the department of investment and public asset management (Dipam), the government has received ₹9,110.56 through disinvestment so far against a target of ₹1.75 lakh crore.

“Air India’s successful sell-off, albeit after multiple efforts, will infuse a fresh vigour to the ambitious plan of disinvestment and privatisation of public sector enterprises,” CII director general Chandrajit Banerjee said.

Friday’s decision of finally selling off the national carrier indeed marked “a watershed event for the policy discourse on disinvestment and privatization” in India, he said in a statement.

“The successful privatization of Air India marks a momentous event and sends out a clear message to the markets and global investors that the present government has the political will to bite the reform bullet,” said Banerjee.

“The move also amply demonstrates the trust which the government reposes in the private sector by bringing them at centre stage with its bold privatization program,” he added.

With taxpayers contributing over ₹1.1 lakh crore to support the loss-making behemoth since 2009-10, Air India’s privatization is expected to release funds to support the government’s spending efforts in sectors that require concerted hand-holding, he said.

“Air India’s successful sell-off, albeit after multiple efforts, will infuse a fresh vigour to the ambitious plan of disinvestment and privatisation of public sector enterprises,” he added.

After Air India, the government has lined up other PSEs for strategic sale, including Bharat Petroleum Corporation Ltd (BPCL), CONCOR and Shipping Corporation of India.

The recent announcement on asset monetisation will further bolster the government’s resource raising ability, Banerjee said.

“In order to capitalize on the optimism and positive buzz created by Air India sale, the government could now look at fast-tracking its efforts of privatization in the banking space, which would set the direction in an area where reforms have been long overdue,” he said. This is much needed for greater efficiency and scale in banking and the time is right for moving ahead with the privatization of two identified public sector banks, he added.

One of the critical building blocks which set up the template for a successful privatization policy was the move to delineate public sector enterprises (PSEs) into strategic and non-strategic sectors in the Union Budget 2021-22, he said.

Apart from this, another important aspect of the government’s disinvestment policy includes setting up a special purpose vehicle (SPV) for monetising land and giving incentives to states for carrying out similar disinvestment of state PSEs, he said. In this regard it may be useful for the government to “monitor and publish the sales that are taking place through SPVs” to ensure “transparency in deals” and “generating greater interest” from bidders, said Banerjee.