The decision by the Cabinet Committee on Economic Affairs to, in essence, hand over Rs 30,000 crore to Air India is among the most unjustifiable decisions in India’s recent economic history. The very size of the package is enormous, inviting comparisons with the entire outlay of the rural employment guarantee scheme for this year; it is considerably more than what the central government spends on health. Such comparisons may appear unfair, given that the amount is to be slowly infused into the ailing carrier over eight years, rather than all at one go. It is instructive to note, though, that the government is being stingy in bailing out the Indian Railways, which would want sums much lower than these — in spite of the fact that Air India matters to, at most, a few percentage points of India’s population, and that too the section most able to withstand the marginal increase in fares that would accompany a carrier serving a small fraction of the market dropping out. On any moral and ethical dimension it is scandalous that a fiscally irresponsible government is handing over so much taxpayer money to an enterprise that is terribly run, unpopular with customers, and is serving only India’s wealthiest.
The folly of guaranteeing Air India’s future to this extent is magnified when one considers that, in the end, even this plan may not be enough. True, the disbursal of funds is hedged about with one rider or another. For example, there are “milestones” to achieve: the airline must achieve a load factor of 75 per cent, and an on-time performance indicator of between 85 and 90 per cent. Anyone who has travelled Air India in the past 10 years will agree this sounds like a difficult proposition — transforming the airline’s work ethic and productivity is likely impossible. Yet, is it not likely that, when these milestones are not achieved, the money will be disbursed anyway? This is because the government has shown itself unwilling to realise that Air India should, in fact, end its existence if it is unable to meet the standards of the market. The root cause is that the Centre just does not accept that Air India is a sad relic of the statist past, one that is out of place and out of time, and deserves to be shut down. It is open to question whether this is because the United Progressive Alliance itself also hankers after that past; or because functionaries of the government are accustomed to the travel perquisites that a state-owned airline must perforce hand out; or because nobody wants to tell Air India’s 27,000 employees that the taxpayer can find better use for her money than to pay their salaries.
Air India and its employees can no longer claim the crisis is not of their making. True, the company was forced into an inappropriate purchase of aircraft based on an optimistic expansion plan. However, that no expansion has taken place at all is a function of the airline’s incompetence and its inability to stand up to competition. It should go without saying that Rs 30,000 crore is a lot of money. This government should rethink its commitment to bailing out a failing enterprise.