Dhiraj Nayyar is director of economics and policy at Vedanta Resources.
Until last year, Air India was a chronically inefficient state airline. The company had not made a profit for nearly two decades and was saddled with $8 billion in debt. Its planes continued to fly only because the government spent billions of dollars to keep them running.
Finally, a year ago, Air India was sold to Tata Group, the country's largest diversified business conglomerate, and now it is about to place orders for 500 aircraft worth $100 billion to help it enter India's booming aviation market. Its change should prompt the government to privatize more than 250 other businesses it owns. (My employer, Vedanta Resources, has been involved in the privatization of some Indian government assets.)
These include many businesses: defense equipment manufacturing, energy production, telecommunications, oil extraction, textile manufacturing, and more. In almost every sector, with the exception of nuclear power, there are more efficient private enterprises, and they are constrained by competition from the state.
Individual state enterprises bring in decent profits, but only those that are either protected from competition or enjoy special preferences. Coal India, for example, had a monopoly on coal production until last year. And even the value of these companies has been falling over time. A cursory comparison of the BSE Sensex benchmark index with the benchmark index of public sector enterprises (state-owned companies) listed on the BSE India stock exchange shows that government activity has stagnated over the past decade, even as private business has grown by 300 percent.
Narendra Modi, India's prime minister, has often said that the government has nothing to do in business. Nevertheless, after eight and a half years in office, Air India is one of only two enterprises that have been successfully privatized. (The other is a stand-alone steel plant closed for operation, also sold to the Tata Group.) Attempts to sell Central Electronics and Pawan Hans (helicopter service) were blocked by the courts and the government after questions were raised about the buyers. ' Entry details.
The challenge here is practical rather than ideological. Any proposed sale of government assets raises suspicions about their prices and whether they are being sold to 'buddies' or 'oligarchs.' Air India was an exception because the company was owned by the Tata Group before it was nationalized in 1953. Its sale was seen as an equity, not a giveaway.
