Will privatization cure Air India?

In one more push by the privatization juggernaut, the Indian government has given the go-ahead to the privatization of debt-laden Air India and five subsidiaries. Following a Cabinet meeting, India’s finance minister Arun Jaitley has said that in-principle approval for its divestment had been given and a panel headed by him will decide the modalities of the Air India sale. Arun Jaitley also said that the approval was according to a proposal by the Ministry of Civil Aviation.

The decision reflects the government’s resolve to pushing the public sector airlines into private hands. The financially bleeding airline has debt of over Rs 52,000 crore and has been surviving due to a Rs 30,000-crore bailout package by the previous UPA government in 2012.

Privatization: A panacea for all public sector ills?

There are many votaries of privatization and who feel that the Indian state need not manage and run commercial enterprises and should step back from its obligations of being a welfare state. They say that that being in public hands compromises on profits and efficiency in enterprises and say that the move achieves overall welfare of people. The development, in my view, clearly signals India’s descent into the hands of people who believe in the doctrine of laissez faire.

However, there are many other who look at the step as a regressive one, one in which the State gradually abdicates all responsibility of serving the people. Moreover, the future of the workforce of one of India’s largest airlines hangs in uncertainty. Their voices have been muted.

Perhaps, the government could have waited a little longer as the embattled Air Indiahas seen an increasing number of passengers due to convenient flights to the USA and Europe and also due to problems affecting Western and Gulf-based airlines. Moreover, the development completely defeats the purpose of the assistance that was given to sustain Air India. Additionally, privatization need not be the sole panacea of solving all public sector problems. Particularly, a debt-ridden and inefficient airlines.

Countries that have followed a privatization model don’t always have a glorious story to tell. British Rail, after privatization, has gained a reputation for mismanagement. Even, British Airways and Lufthansa have not been great success stories. Consequently, it would be foolhardy to expect that mere privatization would spell an overnight turnaround for the beleaguered Air India. Let’s see how well the Maharaja is able to cope with its change of ownership.


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