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ABSTRACT

Current economic policies of Goverment of India advocates not to run businesses but to focus on policies how to govern the country. From the strategic disinvestments of many public sector enterprises (PSUs), it is very clear that government strictly believes that businesses are to be run by business people.

In October 2021, after multiple rounds of auction and negotiation, Air India and its stake in two other businesses Air India Express Ltd (AIXL) and Air India SATS Airport Services Pvt Ltd (AISATS) were sold to Tata Group.

Air India (AI), in pre-independence era was owned by the Tata Group only which started Air India in 1932. However, AI was nationalized and made a Government Undertaking by first buying 49 percent stock in 1947 and remaining 51 percent share in 1953 by the Govt. of India. AI became the largest Indian aviation player and was operating largest number of overseas flights, however, it was running in great losses and was dependent upon government support to cover up its losses. It is reported that by the August 2021, Air India had reached to a debt of 61,562 crore rupees and the Government of India had already spent about 1.1 lakh crore rupees of taxpayers’ money to keep this airline afloat.

In 2007, decision of merging Air India (AI) with its domestic offspring Indian Airlines was taken up by the government with a hope to reduce its losses. Central government in past made several attempts to sell its stake in airline business but without success. First attempt was made in 2001 to sell 40 percent of Government’s stake but didn’t get any suitable buyer. With each passing day, government was incurring crores of rupees in loss in order to keep AI afloat. The 2018 attempt by NDA government to divest its 76 percent stake also couldn’t succeed. The current sale out was also started in 2020. Among reasons attributed to this failure was industry’s perception about not getting operational freedom as government was still trying to put its nose into the business in terms of minority stake hence making private players disinterested in the acquisition. Finally, after multiple past failures in divesting its stake, this time government divested 100 percent stake. Second reason was a huge debt on Air India which no bidder wanted to take on its shoulder. This time, Government of India made it clear that it will own the large chunk of over 61,000 crore rupees of debt hence making an attractive bet for private players.

For full text of this article, Contact Mr. Jitender Sharma at jitender.sharma@jaipuria.ac.in

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