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Air India Privatization Signals a New Take-Off: CII
Oct 11, 2021

History was made on October 8th, Friday with the privatization of national carrier Air India finally coming through, after more than two decades of attempts by the central government. It indeed marks a watershed event for the policy discourse on disinvestment & privatization in India. “The successful privatization of Air India marks a momentous event and sends out a clear message to the markets and global investors that the present government has the political will to bite the reform bullet” said Mr Chandrajit Banerjee, Director General, Confederation of Indian Industry. “The move also amply demonstrates the trust which the government reposes in private sector by bringing them centre stage with its bold privatization program”, he added.

With taxpayers contributing over Rs 1.1 lakh crore to support the loss-making behemoth since 2009-10, Air India’s privatization is expected to release funds to support government’s spending efforts in sectors which require concerted hand holding. “Air India’s successful sell-off, albeit after multiple efforts, will infuse a fresh vigour to the ambitious plan of disinvestment and privatisation of public sector enterprises” added Mr Banerjee. It will help to embolden confidence in government’s capacity to close transactions and thus encourage bidding in future sales. This impetus was much required as government is lagging in its disinvestment plans with only around 5% of the annual target laid out in the Union Budget met so far till August 2021.

After Air India, government has lined up other PSEs for strategic sale including BPCL, CONCOR and Shipping Corporation of India. The recent announcement on asset monetisation will further bolster the government’s resource raising ability. “In order to capitalize on the optimism and positive buzz created by Air India sale, government could now look at fast-tracking its efforts of privatization in the banking space, which would set the direction in an area where reforms have been long overdue”, said Mr Banerjee. This is much needed for greater efficiency and scale in banking and the time is right for moving ahead with privatization of identified two public sector banks, he further added.

One of the critical building blocks which set up the template for a successful privatization policy was the move to delineate PSEs into strategic and non-strategic sectors in the Union Budget 2021-22. This was one of the main recommendations enunciated in a CII Report (The Rise of the Elephant: Enhancing Competitiveness of Central Public sector Enterprises) on PSEs published in 2019.

Apart from this, another important aspect of the government’s disinvestment policy includes setting up a special purpose vehicle (SPV) for monetising land and giving incentives to states for carrying out similar disinvestment of state PSEs. In this regard, “it may be useful for the government to monitor and publish the sales that are taking place through SPVs for monetizing land for ensuring transparency in deals and generating greater interest from bidders”, said Mr Banerjee.

“Air India’s sale marks clearly a turning point for the implementation of reforms in India. Kudos to the team that has implemented this.”, highlighted Mr Banerjee.

11 October 2021

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