Air India privatisation reflects government resolve to bite reform bullet: Confederation of Indian Industry

The Confederation of Indian Industry on Monday said privatisation of national carrier Air India sends out a clear message to the markets and global investors that the Centre has the political will to bite the reform bullet.

The chamber said the time was right to expedite disinvestment efforts in the banking space, with privatisation of identified two public sector banks.

“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,” CII Director General Chandrajit Banerjee said.

He stated that it will help 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,” said CII.

The government on October 8 had announced that salt-to-software conglomerate Tatas have won the bid to acquire debt-laden national carrier Air India for ₹18,000 crore.

This includes a cash payment of ₹2,700 crore and taking over ₹15,300 crore debt. The deal, which is expected to be completed by December-end, also includes sale of Air India Express and ground handling arm AISATS.

The government has budgeted ₹1.75 lakh crore from stake sale in public sector companies and financial institutions, including two PSU banks and one insurance company, during the current financial year. The amount is lower than the record target of ₹2.10 lakh crore to be raised from CPSE disinvestment in the last fiscal.

In her Budget Speech on February 1, Finance Minister Nirmala Sitharaman had announced that the Centre proposes to take up the privatisation of two public sector banks (PSBs) and one general insurance company in the year 2021-22.

The chamber said the Air India sale 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. Banerjee.

“The move also amply demonstrates the trust which the government reposes in private sector by bringing them centre stage with its bold privatization programme,” he added.

With taxpayers contributing over ₹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, CII stated.

“In order to capitalise 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 said.