Air India, one of the few legacies of Nehruvian economy still operating in the country is to be finally privatized by Modi government. The government has set up a special purpose vehicle (SPV) named Air India Assets Holding to transfer the loans of 29,464 crore rupees. The four subsidiaries of the publically owned carrier which will be transferred to SPV are Air India Air Transport Services (AIATSL), Airline Allied Services (AASL), Air India Engineering Services Ltd (AIESL) and Hotel Corporation of India (HCI). “The Union Cabinet has given ex-post facto approval for the creation of the SPV and associated activities for the disinvestment of Air India and its subsidiaries or JV,” said an official statement.
The new SPV has top officials of Air India, Ministry on its board and it was incorporated on January 22. “The board of the SPV includes Air India CMD, Joint Secretary in the Civil Aviation Ministry, Expenditure department, Department of Economic Affairs, Department of Investment and Public Asset Management (DIPAM) and Air India Director (Finance),” said the statement by ministry.
The public sector carrier of the country, Air India, has debt burden of 55,000 crore rupees. Air India has become a burden on public exchequer with thousands of crore being burned every year. The money of taxpayers was being burned by the inefficient management of the company. Finance minister Arun Jaitley approved transfer of 29,000 crore rupees of the company’s debt to SPV- Air India Asset Holding Company last year in November.
Modi government after coming to power in May 2014, made it very clear that ‘government has no business to do business’. The government has realized most of its disinvestment targets in the last four years. In fact, in the year of 2017-18 the government exceeded its disinvestment target of 1 lakh crore and reached to 1, 00,056 crore. “If we see the disinvestment pattern over the last 15 years, then between 2004-05 to 2013-14, we could raise about Rs 1,07,000 crore. In 10 years, the average yearly collection was Rs 10,700 crore. However, from 2014-15 to 2017-18, this collection went up to Rs 2, 12,000 crore. These four years, outstripped the previous 10 years by twice as much, because new instruments were used. The instrument earlier used was strategic disinvestment, but we brought in a lot of other instruments,” said Atanu Chakraborty, secretary, Department of Investment and Public Asset Management (DIPAM).
Since the initial days of independence, India was ‘confused economy’. The government kept the private players out from ‘big industries’ and operated with monopoly. However, small industries were kept open to the private sector. After 1991, the country started economic liberalization and opened the big industries for the private sector. But capitalism was based on favoritism and government was more ‘pro businesses than being ‘pro-market’. Modi government is trying to make ‘New India’ a rule-based capitalist economy. The laws like Insolvency and Bankruptcy Code (IBC) are steps in this direction.