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Q. Need to privatise Air India: Why Air India needs to be privatised? Discuss.
Aug 24, 2016 Related to : GS Paper-3

Ans :

Introduction-

It is expected that troubled national carrier Air India, is likely to post a nominal Rs 100 crore operational profit for the current financial year after umpteen years of losses. Now it is reported that Air India is seeking to restructure Rs 10,000 crore of its debt into equity. Though it is right step towards restructure, but without much-needed strategic direction and managerial acumen, Air India can hardly be expected to soar in the increasingly competitive market.

Why Air India needs to be privatised?

  • Air India has already received about Rs 30,231 crore bailout package from the government, considering its record the exchequer cannot be expected to bail out Air India indefinitely.
  • According to new plan, the commercial banks would convert Rs 10,000 crore of their lending into equity stake in Air India. However, despite their heightened stake and board presence, banks would not have the managerial expertise to run an airline.
  • The proposed capital restructuring seems to be temporary solution, hence for overall improvement Air India needs to be privatised for its better management.

Suggestions-

  • The government needs to firm-up a timeline to divest stake in the struggling carrier and invite a strategic investor who understands the airline business to take firm control of Air India.
  • Instead of using civil servants, there is need to overhaul its managerial talent and opt for sound operational revamp.

Conclusion-

In a current position the proposed restructure plan seem necessary, but for long run simply tweaking the debt-equity structure would not restructure the struggling national carrier. It would merely allow Air India to muddle along with thoroughly suboptimal performance, which would be at a huge national cost. Hence it must be privatised for better management.


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