Goodbye Maharajah!

The turbaned Maharajah was the symbol of India’s flagship foreign carrier – the Air India. The domestic carrier was the Indian Airlines Corporation or IAC. Both were suffering losses as most public sector undertakings do, not just because of bad management but other reasons also. Eventually the IAC was merged with the Air India in December, 2007. By that time, Government monopoly on air travel had ended and many private airlines had entered the field. They were all competing with the Air India. Its losses were mounting. The Maharajah was becoming a pauper. The cumulative losses of the Air India were mounting from year to year. Its total debt now stands at Rs. 52,000 crore.. In just three years from 2012 to 2015, the cumulative losses rose to a whopping Rs. 6415 crore. In the era of privatization and liberalization, it was a question of not whether but when the Air India would be sold out.
Now the Government has announced its decision to sell Air India. The Tatas have shown their interest. The Government is contemplating whether to make an outright sale of the debt-ridden carrier or to retain a nominal 15 per cent share of it. Some of the private airlines are believed to be in bad financial health. Vijay Mallya’s Kingfisher Airlines has already wound up as Mallya himself faces a Rs. 9000 crore fraud case. If Air India is privatized, it will mean the Centre handing over all air traffic operations to the private sector. Eventually, the smaller competitors will be eliminated. Only two or three big operators will be left in the field.
A pertinent question may be asked. If the hugely debt-ridden Air India is acquired by a private corporate giant, it will do so only to run it as a profit-making body. If they can turn around the fate of the Maharajah why couldn’t the Government do so? Why is it that most PSUs have run into debts but when sold to the private sector they regain their health? Few, if any, comprehensive and systematic studies have been made to find out the causes of most healthy PSUs turning sick, but when handed over to the private sector they are restored to the pink of health.
One way of making PSUs profitable was to free them completely from bureaucratic and political control and allow them to be run purely on a commercial basis. There are specific cases when sick PSU units submitted schemes to the ministries concerned to make them profitable but there was no response from the officialdom. The revival schemes did not involve huge capital investment but an unsympathetic bureaucracy ensured their death.

Tuesday, 27 June, 2017