A historic moment

Air India privatisation is a milestone in India's reforms

Air India has officially been handed over to Tata Group, ending its decades of public ownership. The airline, before it was nationalised, had of course been one of the jewels of the Tata empire, and former Tata Group chairman Ratan Tata in particular never seemed to have given up the quest to regain the company that had been set up as Tata Airlines in 1932. The Tatas won the airline at an auction in October with a bid of about Rs 18,000 crore as enterprise value, including taking on Rs 15,300 crore of the airline’s debt. The airline, by some estimates, lost Rs 20 crore a day, and reforming it will require extraordinary effort. The Tatas are not new to the sector, given that they part-own the only other full-service airline left in India, Vistara, as well as the Indian arm of low-cost carrier AirAsia. Many Air India planes are relatively new, but they will need extensive refurbishment and it remains to be seen if the service experience can be raised to private-sector standards in the short term, given that the Tatas have committed to not fire any employees for a year.

Yet it is necessary to consider what a historic moment this is — one that many thought would never come. Air India has been a totemic example of mismanagement in the public sector and of the government retaining a hold on sectors in which it has no rational reason to participate. Air India provided dubious utility to the government, soaked up vast amounts of taxpayer cash, and distorted the entire civil aviation industry — but even so all suggestions and even actual attempts to end this state of affairs failed for decades. This privatisation may have come well into Prime Minister Narendra Modi’s second term, but it is nevertheless a signifier of how far the Indian leadership has come in terms of accepting privatisation in the past decade. It is to be hoped that Air India, in the private sector, demonstrates success and is turned around effectively by Tata Group, as the demonstration effect of a successful privatisation will be considerable. This is, unquestionably, a milestone for post-reform India.

This remarkable effort by the government must not be a one-off. While it deserves full credit for pulling off a successful sale, the government must not rest on its laurels. Much else in the public sector — including elements of the state-controlled banking sector — remains hopelessly inefficient and underperforming, with privatisation the only way out. The sale of Air India can give rise to hopes that other such long desired strategic moves might also be carried out in the coming years. Stake sales of the sort planned for the Life Insurance Corporation of India and others are naturally important, but there is no substitute for the actual transfer of control in the manner that has happened with Air India, since the effect is not just to raise revenue for the government but also to ensure that the assets are better managed and more productive. It might feel like a long shot to imagine a partial reversal of bank nationalisation. But after the nationalisation of Air India has finally been reversed, it does not seem out of the realms of possibility.