Decision to suspend Air India divestment is a highly disappointing reversal of the Government of India’s earlier commitment to privatisation of the national carrier

June 19, 2018by capa-india

Decision to suspend Air India divestment is a highly disappointing reversal of the Government of India’s earlier commitment to privatisation of the national carrier

19 June 2018

Under continued government ownership, with no clear roadmap, Air India is likely to see its domestic and international market shares decline over time to a point where the carrier is no longer relevant.

In the meantime, losses will continue (estimated at USD1.5-2.0 billion over the next two years alone), representing an unnecessary drain on tax payer funds, to subsidise a government business in an industry which is well-served by private operators.
There will never be a perfect time for the privatisation of Air India because the nature of the transaction necessitates bold decisions. The more time that passes, the more difficult those decisions become. And if the government is neither able to structure a deal, nor has the appetite to fund losses, eventually the only other option may be closure. But for now, in light of today’s decision, the government should at the very least focus on implementing comprehensive, enterprise-wide restructuring under a special administration to stem the losses significantly. Maintaining and funding the status quo would be the most unfortunate outcome.

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