Allowing FDI in Air India

Why in news?

The Union Cabinet has given its approval for allowing up to 49% foreign investment in Air India (AI), albeit with certain conditions.

What are the implications?

• This will allow foreign carriers to bid for the AI along with an Indian partner, which will implicitly broaden the spectrum of potential investors.
• This is particularly significant for its timing, as a Parliamentary standing committee report had asked for the reconsideration of divesting AI.
• The panel had asked the government to explore other alternatives and also demanded a wait of at least 5 years to facilitate AI’s revival. 
• The panel had also flagged concerns about job losses as a consequence of disinvestment and asked the government to assess such eventualities.  
• Notably, AI had a total debt of about 49,000 crores in March 2017 and the carrier is expected to report a net loss of about 3,600 crores for 2017-18.  
• While there have been some marginal improvements in the recent months, it has been largely perceived as grossly inadequate.

What is the way forward?

• With multiple contradictory claims, the parliamentary panel has clearly vouched against privatisation without a nuanced analysis of the AI case.
• As most arguments put forth have been heard before and haven’t been bearing fruit, it is prudent for the government to ignore these recommendations.
• There is an urgent need to reconcile to the fact that AI has been burning a big hole in the public exchequer for long and has to be done away with. 
• Notably, AI doesn’t even enjoy centrality in the Indian Aviation sector anymore, as private carriers now account for 86% of the traffic.

Source: Business Standard