Budget 2018: Govt officially announces it intends to privatise Air India

New Delhi: The government has officially announced that it intends to privatise national carrier Air India. The government has so far been maintaining that it is yet to decide the quantum of disinvestment of its stake in the national carrier in which it owns 100 per cent stake. The words “strategic privatisation” were used for Air India by finance minister Arun Jaitley in his Budget speech. This obviously indicates that at least a maj-ority 51 per cent stake in Air India will be sold by the government to private players.

The government in its Budget speech also mentioned a new initiative — NABH Nirman — wherein it proposes to expand India’s airport capacity “by more than five times to handle a billion trips a year”. In the wake of the government’s push for the Regional Connectivity Scheme (RCS) or Ude Desh ka Aam Nagrik (Udan) — that is helping put even remote areas in the country on the aviation map — and in which fares for some of the seats on flights are subsidised by the government, Mr. Jaitley said, “Even those who wear ‘hawaii chappals’ (slippers) are travelling by ‘hawaii jahaz’ (aircraft)”.

The allocation for the civil aviation ministry for 2018-19 has also been hiked steeply and pegged at Rs 6,602 crore, up from just Rs 2,710 crore in the revised Budget estimates for 2017-18. Of this amount, Rs 4,469 crore has been earmarked for “purchase of two new aircraft for special extra section flight operations”, seen to be a reference for VVIP flights. The finance minister also announced that “for promoting tourism and emergency medical care, the government will make necessary framework for encouraging investment in sea plane activities”.

On Air India, Mr Jaitley said, “The government has also initiated the process of strategic disinvestment in 24 CPSEs. This includes strategic privatisation of Air India.” Budget documents show that the budgetary support allocated to Air India in 2018-19 as part of investment in public enterprises is Rs 650 crore, down from Rs 1,800 crore in the revised Budget for 2017-18. The separate capital expenditure support for the turnaround plan of Air India has also been earmarked as Rs 650 crore, again down from Rs 1,800 crore in the revised Budget estimate for 2017-18.

In his Budget speech, finance minister Jaitley said, “In the last three years, the domestic air passenger traffic grew at 18 per cent per annum and our airline companies placed orders for more than 900 aircraft. Regional Connectivity Scheme of Udan, initiated by the government last year, shall connect 56 unserved airports and 31 unserved helipads across the country. Operations have already started at 16 such airports. Airport Authority of India (AAI) has 124 airports. We propose to expand our airport capacity more than five times to handle a billion trips a year under the NABH Nirman initiative. Balance sheet of AAI shall be leveraged to raise more resources for funding this expansion.”

It may be recalled that the NDA government’s recent move to allow FDI by foreign airlines in debt-ridden national carrier Air India upto 49 per cent was an indicator that the government is serious about disinvestment in the loss-making cash-strapped national carrier so as to bring about fresh infusion of funds. However, the government has made it clear that the critical “substantial ownership and effective control (SOEC) of Air India” remains in Indian hands. The government had announced last year that there would be disinvestment in Air India, but the extent of it is yet to be decided. It had constituted an inter-ministerial group to chalk out the strategy in this regard.

The government’s announcement of plans for a “necessary framework for encouraging investment in sea plane activities”. PM Modi had flown in a seaplane in Gujarat ahead of the Assembly polls there.