Our terminal illness
There is no reason for the State to own airlines or airports. The private sector has the capital and management capacity to provide the necessary services, writes Abhijit Banerjee.india Updated: Jul 06, 2010 22:41 IST
It is hard for any patriotic Bengali to travel from Calcutta’s old airport to Bangalore’s shining new one without experiencing a few moments of naked jealousy. It didn’t help that the belts that are supposed to carry the baggage into the airport’s belly and thence onto the plane were broken and the infinite lines wrapped around each other in elaborate jalebi patterns, creating opportunities for creative readings of history by some (“I have always been standing here”) and heart attacks for others. The sweet young woman at the Jet Airways counter said that it was the same every day and, indeed, a couple of days later I met an old friend who had missed his flight while waiting in line.
When we finally walked into the preternatural hush of Bangalore’s swank-spot, my travelling companion — who isn’t known for her pro-market views — shook her head and said, “How did we (Calcuttans) end up where we are?” The answer, of course, is for the same reason why Air India still exists, despite the fact that I can’t step into an Air India flight without feeling the way the people of the village in Washington Irving’s story must have felt when Rip Van Winkle, having slept through the last 20 years without realising it, walked in. I want to tell the staff about how the world has changed, except that it seems a little cruel, given that they seem so resolutely committed to not finding out.
If there ever were good reasons for the government to own things like airlines or airports, it’s been some years since they stopped being even remotely plausible. We certainly have a private sector that has the capital and the management capacity, and while this may not have always been true, it’s worth recalling that the Tatas started Air India. There may be places where there is a military or social or political argument for maintaining a higher level of services than what the market would bear. But the obvious solution is to have private players bid on the least amount of subsidy that would take to get them to provide necessary services.
As for the primal fear of ending up with a monopoly of some kind, the evidence seems to be that while there are indeed some advantages to being big and, therefore, some tendency towards concentration in the airlines industry, there are also advantages of being small and nimble.
The pattern we see the world over is that of a few large carriers that ‘serve’ the world, offering connectivity across the world to those who are willing to pay for it, and a bunch of ‘no-frills’ airlines — Ryanair, Easyjet, Air Asia and South-west are well known examples — that offer much lower fares to the young and the patient on the most popular routes. We seem to be headed in the same direction with the new crop of low-cost airlines.
As for airports, there needs to be an effective regulation — it’d be a bad idea, for example, to allow Jet Airways buy airports and decide who gets to land there and at what price. However, we have probably already figured out how to make that work, given that nobody is suggesting that it’s a major issue with the airports already privatised. Moreover, the fact that these new airports double as shopping malls makes it less likely that they will raise the landing fee too high — after all, if people don’t fly, the mall will be empty.
I think it’s clear that public ownership in air transportation in India (I should make it clear that I am not arguing for across-the-board privatisation of the transportation sector — the experience of railways in Britain is a lesson in how privatisation can go wrong) is a purely political gesture. There is clearly a small group of people in the government that’s not insensitive to the advantages of owning things like airlines, and are, therefore, happy to side with the institutionalised Left, which desperately needs these trophies to convince themselves — and their ideological allies in the chattering classes — that they remain at the ‘vanguard’ of the ‘fight against global capitalism’.
Never mind that Air India’s monthly cash deficit of Rs 400 crore is, for example, enough to pay for private tutoring of every one of the approximately half crore children who take the Class 10 exam every year, at the not ungenerous rate of Rs 800 per month. What do you think an average parent cares more about — a national airline, protecting the jobs of a relatively small number of well-paid airport and airlines employees or the hope that their children would actually master English and Science and Mathematics? When will ‘people’s parties’ actually start making common cause with the people?
Abhijit Banerjee is Ford Foundation International Professor of Economics and Director, Abdul Latif Jameel Poverty Action Lab, MIT
The views expressed by the author are personal