Air India strike sparks debate over privatization
By Rama Lakshmi,
NEW DELHI — Pilots with India’s state-owned airline entered the eighth day of an indefinite nationwide strike Wednesday, demanding higher wages and a probe into what they call the company’s near-destruction by corrupt or incompetent officials.
With more than 90 percent of Air India’s domestic flights canceled and tens of thousands of passengers affected, the pilots’ action has reignited a polarizing debate here over the privatization of such ailing state-owned enterprises.
In recent days, Indian news media and social commentators have urged the government not just to sell Air India but to get out of the business of running businesses entirely. The federal government owns at least 217 companies, including hotels, and steel, tire, textile and machine-tool plants, with a total investment of $129 billion, according to a Finance Ministry report.
“There’s no longer a case for continuing with an airline that haemorrhages taxpayer’s money,” the Times of India declared in an editorial Monday. On Sunday, columnist Tavleen Singh wrote in the Indian Express: “We have indulged the Indian state for far too long in its failed business ventures.”
Calls for the dismantling of the government’s Soviet-style holdover businesses remain controversial, even after two decades of free-market economic reforms. Officials and analysts often refer to the state-owned companies as “family silver,” possessions not to be sold off casually.
The Air India crisis has also renewed memories of controversial privatization projects in which government assets were sold to private companies at bargain prices.
In Mumbai, a government-owned hotel called the Airport Centaur was sold for $18 million after it reported a loss in 1999. A 2004 government audit said that the price should have been $49 million. A state-owned telephone company was also sold to a private firm in 2002, but elements of that deal have still not been implemented because of bureaucratic delays.
“There is widespread corruption and inefficiency in the way the bureaucrats and politicians run these companies, driving them to loss,” said Amit Bhaduri, professor emeritus of economics at the Jawaharlal Nehru University in New Delhi. “This inefficiency becomes a justification for privatization. Then, very often ... they have been sold at extremely low prices to the private sector.”
But despite disagreements on the solution, critics and employees of state-owned businesses broadly agree on the problem, accusing politicians of treating government-owned companies as their personal fiefdoms, using them for personal or political gain or mismanaging them.
The striking pilots of Air India list a string of bad decisions by the Civil Aviation Ministry that drove the airline into the ground in the past five years.
They say the ministry deliberately withdrew Air India from profitable routes and allowed private airlines to fly them instead. Then in 2007, it merged the company’s domestic and international operations, ignoring opposition. In 2009, it ordered 111 new planes at a cost of $9.8 billion.
Last year, the cash-starved airline’s losses topped $1.5 billion.
A parliamentary committee examining the losses said that the root cause of Air India’s malaise was the “ill-conceived” and “sloppy handling” of the merger. It also called for a transparent review of the route and time-slot allotment process that favored private airlines.
Analysts say they fear that all this is a prelude to selling Air India cheaply to companies with ties to government officials.
“There is a nexus between politicians, bureaucrats and private airline companies,” said Mohan Ranganathan, an aviation expert and a member of a government panel on civil aviation safety. “These officials have to be punished for systematically degrading the assets of Air India.”
In the past week, analysts have prescribed various cures for the airline’s ills: Hire a board of independent professionals, offer a fresh bailout, privatize.
But one Air India pilot said that the airline with the maharajah mascot also fulfills an important social function.
“Air India is like a donkey, an unglamorous beast of burden. We play a social role,” said the pilot, who was not on strike but requested anonymity because he is not authorized to speak to the media. “Seventeen percent of our domestic routes are designed to connect backward, remote areas of the country. No private airline would touch these routes with a barge pole because they are not profitable.”
And, the pilot added, “we are the ones who evacuated Indians from Libya when the war broke out.”