People's Review
Who gained from the Air India privatisation deal? Is it the “taxpayer” or the Tata group?

Prime Minister Narendra Modi’s Air India privatisation has received a lot of appreciation from the corporate world, the mainstream media and his far-right, Hindu nationalist Bharatiya Janata Party (BJP), however, it has been criticised, condemned and opposed also. But why? What makes it a disastrous decision? 

Finally, Prime Minister Narendra Modi’s government disclosed, after initially denying, that it has been able to close the Air India privatisation deal with the 153-year-old Tata Sons, the principal investment holding company and promoter of the Tata Group– also the original promoter of the carrier.

M/s Talace Pvt Ltd, a wholly-owned subsidiary of Tata Sons Pvt Ltd, emerged as the successful bidder for the sale of the Union Government’s stakes in Air India, Air India Express Ltd and its ground-handling arm Air India SATS (AISATS) along with management control. The offer of Rs 180 bn by the Tata Sons ousted Spice Jet’s Ajay Singh-led consortium, which offered Rs 151 bn for the debt-ridden carrier.

The news of Air India privatisation elicited a diverse range of reactions, varying from very favourable to extremely hostile views. While the vociferous advocates of the neoliberal economy have hailed the move and expressed happiness over the fact that the Tata group—which founded the airlines in 1932 as Tata Airlines and named it Air India in 1946 before it was nationalised in 1953—has finally managed to regain control of the airlines, the opponents, especially the trade unions, the leftwing forces, etc, have criticised and condemned the move.

While the mainstream media has been going gaga over the news of Air India privatisation, there has been a dearth of proper analysis of facts to understand the implications of the move and its long-term impacts on India.

What are Air India privatisation deal supporters saying?

Who are happy with the Air India privatisation news? The aviation sector’s customer base, ie, the urban elites and upper-middle-class, has been visibly happy with the carrier going to the Tata Sons.

The big crony-comprador capitalists, industry associations, corporate lobbyists and stockbrokers are visibly happy over Air India privatisation deal.

For years, the mainstream media outlets have been creating mass opinion in favour of privatisation. These media outlets are now visibly happy that the Tata group will own India’s national carrier and have been preaching that Air India will be performing better now.

Air India plane
Air India operates different routes connecting tier-II cities. In picture an Air India flight at Kazi Nazrul Islam Airport, Durgapur, West Bengal. Circa 2019.

What are their arguments in favour of Air India privatisation?

Most advocates of the neoliberal economy have been using the quintessential rhetoric that running enterprises are not the government’s job and the latter must only limit its role as a regulator.

The huge losses incurred by Air India — according to former aviation minister Hardeep Singh Puri, it incurred a daily loss of Rs 200m despite running on profit—due to its huge debts have been cited in most media outlets as a reason why the carrier’s privatisation is a good decision.

The Air India privatisation ended a 19-year-long privatisation impasse and indicated that big corporates may now vigorously pursue other public sector enterprises like the Bharat Sanchar Nigam Limited (BSNL), the Container Corporation of India (CCI), etc.

According to these advocates of reckless privatisation and liberalisation, the Tata group will be able to manage the flagbearer carrier better than the government and that the taxpayers’ money will be saved from wastage behind the loss-making unit.

“This is nothing but a free gift of our National Carrier to Tata. It has demonstrated the worst ever perverted economic deal of this fascistic political dispensation having organic nexus with corporate capital for frittering away national asset in favour of their corporate masters for song (sic).” 

Tapan Sen, general secretary CITU

Who all are opposing the Air India privatisation deal? What are they saying?

The trade unions and leftwing forces have been opposing Modi’s privatisation spree amid the COVID-19 pandemic, accusing the prime minister of helping big corporates that fund his Bharatiya Janata Party (BJP).

Though the Air India employees’ unions have welcomed Tata’s takeover of the carrier, they have expressed apprehensions regarding imminent layouts under the new management.

Amarjeet Kaur, the general secretary of the All-India Trade Union Congress (AITUC) called the Air India privatisation deal a move against the interests of the people and the nation. Kaur was quoted by Moneycontrol demanding a roll-back of the decision.

Similarly, Tapan Sen of the Centre of Indian Trade Unions (CITU) criticised the handing over of Air India to the Tata group as nothing but a “free gift”. “This is nothing but a free gift of our National Carrier to Tata. It has demonstrated the worst ever perverted economic deal of this fascistic political dispensation having organic nexus with corporate capital for frittering away national asset in favour of their corporate masters for song (sic),” Sen said in a statement.

The Indian National Trade Union Congress (INTUC) vice-president Ashok Singh also criticised the move calling the public sector the backbone of the country.

“This government’s policy is to sell all of the public sectors to the private sector. Which airline flew to evacuate Indians during COVID or Taliban crisis? Air India, because it was government-owned. We are against privatisation because the public sector is the backbone of the country,” Singh was quoted by Moneycontrol.

Not only did the Opposition-affiliated trade unions opposed the move, even the Bharatiya Mazdoor Sangh (BMS), the labour wing of the Rashtriya Swayamsevak Sangh (RSS)—the ruling BJP’s parent body—and a pro-corporate entity, opposed the move. Binoy Kumar Sinha, the BMS general secretary, had told the media that his organisation is going to oppose the Air India privatisation if it affects the employees and their service conditions in any way.

“This government’s policy is to sell all of the public sectors to the private sector. Which airline flew to evacuate Indians during COVID or Taliban crisis? Air India, because it was government-owned. We are against privatisation because the public sector is the backbone of the country.”

Ashok Singh, vice-president, INTUC

What will happen to jobs?

Most of the trade unions are pointing to the fact that the jobs of 12,085 employees of Air India — 8,084 permanent employees and 4,001 contractual employees—are in danger due to the privatisation deal.

Though Tata Sons has provided a year-long employment guarantee from the day of the privatisation deal to the employees, it’s certain that the new management will force most employees to take voluntary retirement and will only hire contractual employees.

This will create a severe situation for the employees of the carrier amid the pandemic and they may remain jobless for a long time as the entire aviation industry is going through a crisis phase for years.

Will India benefit or suffer due to the loss of the carrier?

Air India has been India’s flag-bearer national carrier for 68 years and played a pivotal role during national emergencies, wars and calamities. Air India owns 141 planes, has parking spots in most major airports around the world and carries 12% of India’s total air passengers. It earns two-thirds of its revenue from international operations.

With the Tata Sons taking over the carrier, it’s unlikely that any of its earlier social responsibility functions will be fulfilled anymore. Therefore, the privatisation deal also brings up a national security challenge.

Moreover, the Modi regime’s volte-face on the privatisation terms raises questions. In March 2018, when the government first invited investors for buying 76% stakes in Air India, 100% in Air India Express and 50% in AISATS, it proposed that 70% of the total debts of Air India —Rs 333.92bn then—would pass on to the buyer.

As no private player was eager to share the burden of the debts, the Modi regime further relaxed the norms. In January 2020, it floated an expression of interest (EoI) for 100% stakes in Air India and Air India Express, and 50% stakes in AISATS. At that time, it proposed that out of the total debt—Rs 600.74bn then—the buyer should absorb Rs 232.86bn-worth debts. Yet, no capitalist showed an iota of interest in this proposal as well.

Then, in October 2020, the Modi regime allowed the buyers to choose the amount of debts they will retain and said that the special purpose vehicle (SPV) formed in 2019—Air India Assets Holding Ltd (AIAHL)—for holding debt and non-core assets of the Air India group will retain the rest of the debts.

Now, as Talace Pvt Ltd will retain only Rs 153bn-worth debts, AIAHL—and through it the government and through it, the common people of India—will be burdened with debts worth Rs 462.62bn. This means, while the pie is licked off by the Tatas, the “taxpayers” are left with the rubbish– debts worth Rs 462.62bn.

But why would the common people share the burden of the debts, or why would losses be socialised when profits are privatised? Why can’t the corporate buyers take over an entity with its entire liabilities? If they can’t afford it then why privatisation?

The total cash paid out by Tata Sons for Air India is Rs 27bn, when the net worth of the airlines is Rs 440bn. Moreover, adding all the assets of its subsidiaries, the total asset value of Air India will cross Rs 1 trillion. The Tata Sons made a kill by only paying Rs 27bn for assets worth Rs 1 trillion.

With such massive loss to the common people, is the Air India privatisation a worthy deal? Can this be called business?

When advocates of the neoliberal economy claim that the government’s ownership has been pushing the public carrier towards the brink of collapse, they don’t utter the whole truth. It’s not the public ownership of the resource but the way they are managed, ie, through a bureaucracy servile to corporate houses, which determines how an enterprise will fare.

Air India was India’s sole carrier until the government allowed private players to operate in the domestic aviation space from the early 1990s onwards. The government deliberately allowed the private capital to profiteer from a sector that was built using public money. Allowing private players started destroying Air India and closed doors to its growth opportunities.

Moreover, since the early 2000s, when Modi’s predecessor Atal Bihari Vajpayee’s plan to privatise Air India suffered, the government has pushed the airlines towards a major crisis by forcing it to take loans to buy Boeing’s fleet, which increased its debts. When Indian Airlines was merged with Air India, the debts of the former were also passed on the latter. Gross mismanagement and the government’s tryst with crony-capitalist players made Air India bleed.

The argument that private players can run aviation better is actually a myth. This has been proved by the bankruptcy of airlines like Jet Airways, which was one of the major players in the Indian aviation sector. The story of now-defunct Kingfisher Airlines isn’t different.

Also, the Tata Sons, which owns 51% stakes in Vistara and Air Asia, has been unable to manage its aviation business. The collective losses of Vistara and Air Asia in 2020 were $845m.

Between 2016 and 2020, Vistara’s total liabilities increased by 2284.49% and the total losses have widened by 352.32%. From Rs 4bn in 2016, Vistara’s losses have increased to Rs 18.13bn.

The losses of Air Asia rose 95% to Rs 15.33bn in 2021, while Vistara narrowed its losses to Rs 16.22bn at the same time. Together, these two companies ferry 11% of Indian passengers. These losses are forcing the Tata group to consider merging these entities.

When the Tata Sons has been consistently failing to ensure their existing aviation company run in profit, how will they manage Air India? Or will Air India carry the burden of catapulting the fortunes of Vistara and Air Asia?

In the Air India privatisation drive, it’s the common people, the “taxpayers” about whom columnists write long essays to criticise public sector-driven economic models, who will suffer the most. As AIAHL will continue with Rs 462.62bn debts of Air India, the “taxpayers” will reel under the burden of the government’s past sins that ended the rule of the Maharaja over the skies.

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