Parliamentary panel wants Air India to remain a PSU with less govt control

The House panel argued that the airline earns 60% of its revenue in foreign currency and that this money could end up going to foreign airlines if Air India is privatised.

india Updated: Jan 09, 2018 21:41 IST
Saubhadra Chatterji
Saubhadra Chatterji
Hindustan Times, New Delhi
Air India,Parliamentary panel,PSU
The government is looking to move ahead on plans to privatise Air India though a transport panel’s recommendation calls for giving the airline another five years to turnaround profits. (Mint File Photo)

A parliamentary panel has given as many as 11 reasons why the government should not sell India’s national carrier Air India (AI), even as the process for doing so has begun.

It has recommended that the airline’s accumulated debt be written off and that it “function like a public sector undertaking with less government control.”

The transport panel of Parliament cited a report by the government auditor, the Comptroller and Auditor general (C&AG) that noted that Air India has been able to cut 10% of its variable cost between 2012 and 2016. It also argued that the airline pays Rs 4,000 crore as interest on accumulated loss of Rs 40,000 crore. “If the accumulated losses are not considered for computation of the interest charge, then the operation of AI can be profitable,” the panel added in its draft report, a copy of which has been seen by Hindustan Times.

The civil aviation ministry said on Monday that it would invite expressions of interest in buying Air India Ltd after the budget — indicating the government’s resolve to push the process even as a large section of the political class and stakeholders are opposed to it. “We will be seeking expressions of interest certainly in February,” civil aviation secretary Rajiv Nayan Choubey told Mint on Monday.

The panel, headed by the Trinamool Congress’ Derek O’Brien pointed out that between 2011-12 and 2014-15 the state-owned airline increased its revenue by 33% and compared this with the performance of the Vijay Mallya-owned Kingfisher Airlines Ltd and Jet Airways Ltd, “Empirical evidence is there to suggest that a private sector cannot run an airline better. Kingfisher is a case in hand. Another example is the prima donna of private airlines—Jet Airways.” Kingfisher’s license was revoked in February 2013, after the airline ran into financial difficulties. Jet’s profit after tax stood at a loss of Rs 485 crore in 2012-13. In the last financial year (2016-17), Jet Airways posted a net profit of 438 crores while Air India’s net loss stood at 3643 crore.

The House panel, which asked the government to give five more years to the ailing airline for a turnaround, argued that it earns 60% of its revenue in foreign currency and that this money could end up going to foreign airlines of Air India is privatised. It also expressed concern about the possible job loss for 3.34 lakh people including 50,000 directly.

The panel also pointed out that three of the airline’s five subsidiaries (AI Express, the ground handling wing and the engineering branch) are making profits, and questioned the rationale for their divestment.

Jitendra Bhargava, former ED to Air India, refused to buy the House panel’s arguments and said, “For last two decades, the Air India’s turnaround plan failed to work. This is the perfect time to disinvest as the airline will only go from bad to worse in future if its remains under bureaucratic control.”

The civil aviation ministry, which in March 2017 told the panel that AI is not being disinvested, later said the airline “is not in a position to generate enough cash flow to be in a position to start repaying principal amounts on its debt”. As a result, and given “ committed fleet induction plan and current oil prices, the AI business is not sustainable.”

Ironically, the Air India Chairman told the panel that the merger of Indian Airlines with AI was the “main reason” for the airline going into losses. “The merger, instead of creating a synergy, created an environment where they were not able to perform efficiently.” Indian Airlines was also state-owned. The merger was pushed through by the United Progressive Alliance government.

The panel also criticised other aspects of how AI was managed under the UPA. It termed decisions to buy aircraft then as “political and not administrative”, and maintained that surrendering profitable routes to Emirates, Etihad, Qatar, Fly Dubai and other private airlines hurt the organization economically.

Interestingly, the panel slammed NITI Aayog, the government’s policy think-tank that had initially mooted the idea for disinvestment, for “acting as a spokesperson of private sector.” Dubbing NITI Aayog’s rationale that the government should not be in airline business as a “childish argument,” the parliamentary panel said: “If we extend the theory to many other sectors of the functioning of the government, we may have to close down many institutes of national importance.”

No immediate response was available from NITI Aayog.

First Published: Jan 09, 2018 21:40 IST