Tatas reclaim control of Air India after nearly seven decades on Thursday, nearly seven decades after relinquishing control. With a proposal of Rs 18,000 crore, the group was the winning bidder for the airline last year. The Tatas will receive 100% ownership of Air India, Air India Express, and a 50% investment in ground handling firm AI-SATS due to this deal. This is the first sizeable unilateral privatization of a government-owned company in recent years. Though the government’s privatization initiative has been criticized for its speed and manner, the symbolic significance of this deal is difficult to overlook. Has government taken the correct decision? Will this yield betterment for Tata Group?
The Tatas will now have the difficult task of turning the airline around. This will be difficult, mainly because the aviation sector is still dealing with the effects of the pandemic. It will also have to cope with many legacy challenges, including a deteriorating fleet and human resources. The Tatas will be required to keep all employees for a year under the bidding conditions. Devas Multimedia and its investors are attempting to enforce their arbitration awards on Air India’s worldwide assets, which the group must deal with. According to reports, Air India is trying to end the action because the change in ownership precludes any claims for the collection of arbitration verdicts. There’s also the matter of the group’s two competitive airlines, Vistara and AirAsia India, to consider. It’s feasible that the Tatas will contemplate combining their aviation businesses into a single corporation at some time.
Even while this is a significant step forward, it will do little to help the government’s disinvestment revenues. Only Rs 2,700 crore of the Rs 18,000 crore winning bid will be paid to the government, with the remaining Rs 15,300 crore held in debt by the company. According to DIPAM data, the government’s disinvestment proceeds have fallen far short of the plan — against a target of Rs 1.75 lakh crore, collections have only reached Rs 9,330 crore so far. The government, for its part, is hoping that the LIC IPO will be completed by the end of March. However, given the complexities of such a transaction, it is unclear if this will be possible. Similarly, the privatization of BPCL and public sector banks are projected to continue into the following year.