Air India, The White Elephant, Sold - Daily Current Affair Article


Recently, the government announced its decision to sell all its stake in Air India (AI) as well as AI’s stake in two other businesses — Air India Express Ltd (AIXL) and Air India SATS Airport Services Pvt Ltd (AISATS).



  • Defined as the action of a government aimed at selling or liquidating its shareholding in a public sector enterprise in order to get the government out of the business of production and increase its presence and performance in the provision of public goods and basic public services such as infrastructure, education, health, etc through increasing role of the private entities.


  • To reduce the financial burden of the sick, loss-making public sector units on the Government
  • To improve public finances
  • To introduce competition and market discipline
  • To fund growth, social sector welfare
  • To encourage a wider share of ownership
  • To depoliticize non-essential services
  • The current government is pursuing disinvestment, not to vacate the public sector, but to enhance its efficiency. The new disinvestment mantra is to
  • Minimize interference
  • Allow public sector undertakings to function along with commercial principles
  • Grant managerial autonomy in decision-making, such as in appointments.


  • Government's Disinvestment Target for 2020-2021: Government plans to raise Rs. 2.1 lakh crore through disinvestment in 2020-21, with just about Rs. 14,000 crore raised so far through minority stake sales.
  • New Public Sector Policy: As part of the ‘Aatmanirbhar Bharat Abhiyan’ package, the government in May 2020 had announced that there will be a maximum of four public sector companies in the strategic sectors, and state-owned firms in other segments will eventually be privatised.
  • Under the policy, a list of strategic sectors will be notified where there will be at least one and a maximum of four public sector enterprises, apart from private sector companies.
  • In other sectors, central public sector enterprises (CPSEs) will be privatised, depending on the feasibility
  • The government aims to make use of disinvestment receipts for various social sector and developmental programmes and also to infuse private capital, technology and best management practices in Central Government Public Sector Enterprises.
  • A policy of strategic disinvestment of public sector enterprises for providing a clear roadmap for disinvestment in all non-strategic and strategic sectors.
  • Fulfilling the governments’ commitment under the AtmaNirbhar Package of coming up with a policy of strategic disinvestment of public sector enterprises, the Minister highlighted the following as it’s main features:
  • Existing CPSEs, Public Sector Banks and Public Sector Insurance Companies to be covered under it.
  • Most significant, however, is the new strategic disinvestment policy for public sector enterprises and the promise to privatise two public sector banks and a general insurance company in the year.
  • The policy, promised as part of the Atma Nirbhar Bharat package, states the government will exit all businesses in non-strategic sectors, with only a ‘bare minimum’ presence in four broad sectors


  • Strategic disinvestment is the transfer of the ownership and control of a public sector entity to some other entity (mostly to a private sector entity).
  • Unlike the simple disinvestment, strategic sale implies a kind of privatization.
  • The disinvestment commission defines strategic sale as the sale of a substantial portion of the Government shareholding of a central public sector enterprises (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.
  • The Department of Investment and Public Asset Management (DIPAM) under the Ministry of Finance is the nodal department for the strategic stake sale in the Public Sector Undertakings (PSUs).
  • Strategic Disinvestment Policy of 2015-20 rests on key pillars - Minority stake stale by SEBI approved modes and Strategic Disinvestment along with transfer of management control. Strategic disinvestment of CPSEs lies at the heart of the disinvestment policy. Strategic disinvestment would imply the sale of substantial portion of the Government shareholding of a central public sector enterprise (CPSE) of upto 50%, or such higher percentage as the competent authority may determine, along with transfer of management control.
  • Government has mandated two-fold classification of Sectors to be disinvested:
  • Strategic Sector: Bare minimum presence of the public sector enterprises and remaining to be privatised or merged or subsidiarized with other CPSEs or closed.
  • Following 4 sectors to come under it:
  • Atomic energy, Space and Defence
  • Transport and Telecommunications
  • Power, Petroleum, Coal and other minerals
  • Banking, Insurance and financial services
  • Non- Strategic Sector: In this sector, CPSEs will be privatised, otherwise shall be closed.


  • The sale of Air India to a private player has been in the offing for a long time. AI was started by the Tata Group in 1932, but in 1947, as India gained Independence, the government bought 49% stake in AI. In 1953, the government bought the remaining stake, and AI was nationalised.
  • For the next few decades, the national carrier dominated Indian skies. However, with economic liberalisation and the growing presence of private players, this dominance came under serious threat.
  • By 2007, AI (which flew international flights) was merged with the domestic carrier, Indian Airlines, to reduce losses.
  • As of August 2021, AI’s debt was Rs 61,562 crore. Moreover, every additional day that AI remains operational, the government suffers a loss of Rs 20 crore — or Rs 7,300 crore per year. Thus, it became necessary to disinvest in the entity.


  • Several attempts for disinvestment were made, first in 2001 and then in 2018, but failed. This is because
  • The mountain of debt on the entity as well as on the government would burden the new shareholders in the earlier settlement. Now,the government let the shareholders decide what part of debt they want to pick up.
  • Too much nationalisation or even a certain shareholding by the government was making it a little dubious for the private entities to invest in, considering how much operational freedom they would be given.


  • From the government’s perspective,
  • Firstly, it stands on PM Modi’s commitment to reduce the government’s role in the economy; saving taxpayers from paying for daily losses of AI.
  • The total AI debt of Rs 61,562 crore, in which the Tatas will take care of Rs 15,300 crore and will pay an additional Rs 2,700 crore in cash to the government. That leaves Rs 43,562 crore of debt. The assets left with the government, such as buildings, etc., will likely generate Rs 14,718 crore. But that will still leave the government with a debt of Rs 28,844 crore to pay back.
  • From the Tatas’ perspective,
  • First comes the emotional aspect of regaining control of an airline that they started
  • Secondly, AI’s acquisition is a long-term bet. The Tatas are expected to invest far more than what they have paid the government if this bet is to work for them.


  • Government needs to create confidence in the sale processes
  • Give officers some cover from potential post-transaction witch-hunts by auditors and investigating agencies
  • Sequence the sales so that the economy does not face shocks or create monopolies
  • Manage electoral pressures in jurisdictions where these units would be located.
  • It should be ensured that the receipts of such strategic sales aren’t frittered away in interest or salary payouts but are reinvested prudently in long-term infrastructure assets that can yield long-lasting and needed returns to the economy.
  • Also, The Rangarajan Committee on disinvestment 1993 gave some important suggestions:
  • Disinvestment should be a transparent process duly protecting the rights of the workers.
  • It suggested four modes of disinvestment viz. Trade sale, Strategic Sale, Offer of shares and Closure or sale of Assets.


  • The Hindu
  • The Indian Express
  • Business Standard
  • The Economic Times
  • DIPAM website
General Studies Paper 3
  • Infrastructure