Government of India and Air India
The Government of India owns several businesses both overseas and India itself. These businesses (public sector undertakings) are built up for a primary reason which is upliftment and growth of the economy of India. These PSU’s are also built for the profit motive of the government.
The thing is that the government owns more than 500 PSU’s including miniratnas(73), navratnas(14) maharatnas(10) CPSE’s(300+) as of 23 October 2019 and all of these PSU’s can’t be profitable for the government. One such case is of Air India limited.
What exactly is Air India?
Air India is the flag carrier of India and is owned by Air India Limited. also works a fleet of Airbus and Boeing aeroplane serving 94 residential and worldwide destinations. The aircraft has its center point at Indira Gandhi International Airport, New Delhi, close by a few center urban areas across India. Air India is the biggest worldwide carrier out of India with a 18.6% market share.
The Present Conditions
Over 60 global destinations are served via Air India across four mainlands. The aircraft turned into the 27th individual from Star Alliance on 11 July 2014. The business showed a loss of 4600 crores in 2018-19 and an accumulated loss of 69,575.64 crores which has become a huge financial burden for the government.
The loss was mainly due to increasing oil prices in the country. Due to such tragic conditions, the Indian government is opting to a strategic disinvestment wherein it will try to sell off its 100% stake in the company for Rs. 23,000 crore approx.
This is the second attempt the government has made to sell Air India. The first one was made in 2018 for Rs.62000 crore for a 76% stake in Air India. But this was an unsuccessful attempt as no investor came forward to purchase a stake in the company. The last date for the current bid is 17 March 2020. The bidders who have qualified to purchase a stake in the company will be notified by 31st March 2020.
Subsidiaries and more…
The government is also strategically disinvesting in its subsidiaries namely Air India Express and Air India SATS Airport services private limited which is a joint venture. The Modi government is bringing back the trend of disinvestment which was halted when the congress government was in power. BJP is trying to improve its balance sheet by selling of the loss-making companies and investing in stronger businesses for a heavy asset half.
Air India has around 146 aircraft and owns around 56% of those. The business continuously lost valuation due to the arrival of low-cost rivals in the aviation industry.
The employee base of the country is huge, with around 14000 employees and it is going to be a task for the government to restructure these many employees keeping in mind the unemployment caused by the closure of Jet airways.
The downfall of the two of the greatest airlines in India has to lead to a huge setback for the aviation industry and could also hamper the future of the same. The government has faced severe repercussions due to the losses accumulated by Air India and the effect is going to affect India as a whole which would be a great bane for the Indian economy.