Air India : Privatization good or bad!


 
Recently government has announced to privatise loss making Air India. Arun Jaitely in this years budget mentioned the target of getting 80,000 crore from divestment this year. Air india is the priority right now. The main plan is to divest 76% and keep the remaining 24% under their control.

History
Air India was created by JRD Tata before independence. It was origanlly named as Tata Airlines but after getting the approval of international routes the name changed to Air India.
After Independence the government took over Air India. And in 1953 Divided it into 2 separate air lines
1 Air India-International.
2 Indian Air Lines- Domestic
Both the companies were profit making companies till 2000.

During the NDA government in 2000 initiatives to divest air india was taken but was not materialized due to several reason as well as due to strong disapproval by opposition.

During 2007 UPA government took a huge step and merged Air India and Indian air lines.
After the merger it started making losses, therefore in 2012 UPA decided to privatise. Now due to strong opposition the plan was not materialized.
Thus UPA government having no choice proposed to infuse 30,000 crore to revive the loss making Air lines but to no good, the matter started getting worst.

Air India has been making losses since 2007.
Reasons for downfall
  • The major reason according to my observation should be the merger that took place of Air India and Indian Airlines in 2007. The merger proved to be disaster because the 2 companies had totally different environment and work culture and work ethics. The management detoriated due to the merger.
  •     Air India didn’t progress as per the time. After the economic reforms of 1991 and after the entry of private player the productivity of Air India didn’t increase as per the increase in competition.
  • Moreover the recruitment policy of Air India was not in place. The person in charge was mostly IAS or government officer. They were recruited without any training and had meager knowledge about the management of such huge aviation company.
  •   Even when any person in charge retires there is no recruitment from outside instead a person from a junior post is promoted without knowing the capability or caliber of the promoted person. Air India being a government company there were major interference by the government in the function of the companies. Making decision proved difficult due to so many interference.



Requirement and advantages.

·         Air India is having a debt of more than 50,000 crore. This huge debt is not as big of a problem as infusion of working capital is. As the company is a loss making unit the working capital is the money of tax payers. The money used to maintain Air India can be used in some more productive areas like tribal development or improvement if education etc. Inshort the tax payers money won’t be wasted to cover the losses.
·         Commercialization would change the mindset of the people working in Air India, thus they would start working more efficiently. There would be less interference of the government thus management would be more efficient.
·         Moreover foreign investment is limited only upto 49% so any domestic company along with any foreign company in partnership can buy Air India.
·         The company buying Air India would have so many advantages of the MoUS signed by Air India. Air India being so old company have many agreements with different countries thus the acquisition may provide easy access to more routes to the acquiring company.
·         Air India being such an old company has investment in many posh areas over the world. The aquring company can have all the benefits of the inflating prices of the properties.

Disadvantages of Privatisation.

·         The major disadvantage that I can see is the loss of all the valuable property slipping out from the hands of government.
·         The other disadvantage can be job loss. It can be possible that after the takeover they may make some changes in management.
·         Changes in management can also cause distress among the employees.


Every deal has its pros and cons but this deal has more pros than cons. Divestment may
prove to be beneficial by reducing the financial burden on the government by thousands of
crore that is required to run Air India.



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