Citing AI example, Survey flags PSU privatisation difficulties

Acknowledging difficulties in privatisation efforts for public enterprises, the Economic Survey today said there is still a commitment to make the "perennially unprofitable public sector airline" a 'world class' entity.
Citing civil aviation as an example, the survey said privatisation of public enterprises remains difficult even for firms with a strong case to be privatised, though the reform talks in the sector is animated by discussions of as much "an interventionist as liberalising spirit" as reflected in restrictions on pricing.
Without mentioning directly, the apparent reference is to national carrier Air India -- which is staying afloat on a Rs 30,000 crore financial package extended by the government for a ten-year period ending 2021-22.

While there have been clamours to privatise the airline, government has so far desisted from taking a view in this regard.
Air India, which made an operational profit of Rs 105 crore for the first time in a decade in the 2014-15 financial year, is trying to revive its fortunes amid intense competition posed by domestic as well as international carriers.
The Economic Survey 2016-17, tabled in the Parliament today, said, "all states, all societies, have some ambivalence toward the private sector".

After all, the basic objective of private enterprises -- maximising profits -- does not always coincide with broader social concerns, such as the public's sense of fairness, the Survey said while adding that the ambivalence in India seems greater than elsewhere.

Noting that this ambivalence toward the private sector is manifest in multiple ways, the survey said the most well-known example is the difficulty of privatising public enterprises, even for firms where economists have made strong arguments that they belong to the private sector.
"Consider the civil aviation sector. Defying history, there is still the commitment to make the perennially unprofitable public sector airline 'world class'," it said.
The Survey said that recently, airport privatisation has taken the form of awarding management contracts rather than change in ownership.
"Moreover, policy reform in the sector has been animated
as much by an interventionist as liberalising spirit, reflected for example in restrictions on pricing," the Survey said.

It also comes against the backdrop of demands in certain quarters for capping of airfares as well as the ticket price for one-hour flights being limited at Rs 2,500 under the regional air connectivity scheme.
According to the Survey, India is now squarely in the middle of the emerging market pack.
"This is partly because India has allowed the private sector entry into, amongst others, civil aviation, telecommunications, and financial services.
"These have all served to reduce the share of the public sector even if there has not been much exit of the PSU enterprises themselves," it added.
Among others, Foreign Direct Investment (FDI) norms have been relaxed further in civil aviation and other sectors.