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बेसिक इंग्लिश का दूसरा सत्र (कक्षा प्रारंभ : 22 अक्तूबर, शाम 3:30 से 5:30)
Disinvestment of Air India
Aug 04, 2017

[GS Paper III: (Effects of liberalization on the economy, changes in industrial policy and their effects on industrial growth)]

On June 28, the Cabinet Committee on Economic Affairs (CCEA) gave its ‘in-principle’ nod to disinvest stakes in Air India and its five subsidiaries.

Why disinvestment?

  • Earlier efforts to turn around the finances of Air India seem to have failed with its eroding market share, continuous losses and piling debts amounting to Rs. 52,000 crore.
  • Air India’s financial performance over the last decade has been appalling. It has registered a net loss every year since 2007-08. 

What is disinvestment?

  • Disinvestment is defined as the action of an organisation (or government) selling or liquidating an asset or subsidiary. It is also referred to as ‘divestment’ or ‘divestiture’. 
  • A company or a government organisation typically disinvests an asset either as a strategic move for the company or for raising resources to meet general/specific needs.

Objectives of Disinvestment 

  • To reduce the financial burden on the government
  • To improve public finances
  • To introduce, competition and market discipline
  • To fund growth
  • To encourage wider sharing of ownership

Significance

  • Disinvestments can help in improving the accountability of Public Sector Units (PSUs) in India.
  • Apart from reducing the fiscal deficit in the country, proceeds from disinvestment can also finance developments in infrastructure, education, health etc. 
  • Disinvestment by the government can encourage competition in the economy and markets as a whole, which can lead to better quality and choices of products and services for the consumers. 

Department of Investment and Public Asset Management (DIPAM)

  • The Department of Disinvestment was set up as a separate Department in 1999 and was later renamed as Ministry of Disinvestment in 2001. 
  • In 2016, the Department of Disinvestment has been renamed as Department of Investment and Public Asset Management (DIPAM) working under the aegis of Ministry of Finance. 
  • All matters relating to management of Central Government investments in equity including disinvestment of equity in Central Public Sector Undertakings (CPSUs) are looked after by DIPAM.

Way Forward

  • The aim of the sale should be to get the best price for the airline. One way of achieving this would be to allow both domestic and foreign buyers to bid freely for a stake in Air India. 
  • Government resources are scarce and spending it to run businesses like airlines or hotels where the private sector can deliver efficiently represents misallocation of taxpayer’s money.
  • Government ownership of Air India encourages ministers, parliamentarians and bureaucrats to make unreasonable demands at its expense – as Shiv Sena MP Ravindra Gaekwad’s inappropriate behaviour recently demonstrated.  Selling Air India would also be a significant blow to VIP culture.
  • A strategic disinvestment of Air India will cut unproductive subsidies and unleash animal spirits in the economy.


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