Air India privatisation: High hopes?

Nine months after the Union Cabinet’s in-principle nod for offloading the government’s stake in Air India, the ball has finally been set rolling to privatise the bleeding airline. A preliminary information memorandum was unveiled last week by the Civil Aviation Ministry for prospective bidders. According to this, the Centre will divest 76% of its stake in AI. A 100% stake is being offered in its subsidiary Air India Express, and a 50% stake is on offer in its ground handling operations arm. Other subsidiaries, such as Alliance Air, Hotel Corporation of India, which owns the Centaur properties in New Delhi and Srinagar, Air India Air Transport Services and Air India Engineering Services, are not being sold — they will be transferred to a special purpose entity along with roughly a third of AI’s ₹48,781 crore outstanding debt. Effectively, the government is offering a majority stake in AI and AI Express with management control, as well as a cumulative debt burden worth ₹33,392 crore. For prospective buyers, the attractiveness of AI’s international flying rights and slots would be offset by the possibility of taking on so much debt and putting a plan in place to whittle it down or refinance the loans. Details of the reallocation of these liabilities between AI and AI Express, and the logic behind it, will only be shared with bidders at a later stage when requests for proposals are issued.

Given the uncertainties over its debt burden, it will not be a surprise if those bold enough to make a bid for AI find it difficult to offer a lucrative price to the government. It is worth pausing to see if serious investors are enthused by the government’s decision to retain 24% stake in the airline (which will possibly come with one or two bureaucrats nominated to the airline’s board of directors). In 2016-17, the airline suffered a net loss of ₹5,765 crore, owing mainly to its high interest costs. While debt has been the major reason for AI’s losses in recent years, operational inefficiencies and poor management have been bugbears for long. The government is expected to offload its residual 24% stake at a later date, pinning its hopes on a better valuation after the new owner has fixed the airline’s legacy issues. The real benefit of privatisation will be that the airline will no longer drain taxpayer funds, after thousands of crores have been infused over the years to keep it up and running. That its new owner would get some room to rationalise its large workforce a year after the transaction and the government is thinking of footing the bill for some benefits paid to retired employees, such as complimentary air tickets, sounds good. The government is understandably keen to close the AI sale transaction soon, preferably by early 2019, in order to bolster its reformist credentials. But investors will look for the finer details to ascertain the carrier’s true worth.

The Centre could add a few more changes to make Air India tempting for investors

Nine months after the Union Cabinet’s in-principle nod for offloading the government’s stake in Air India, the ball has finally been set rolling to privatise the bleeding airline. A preliminary information memorandum was unveiled last week by the Civil Aviation Ministry for prospective bidders. According to this, the Centre will divest 76% of its stake in AI. A 100% stake is being offered in its subsidiary Air India Express, and a 50% stake is on offer in its ground handling operations arm. Other subsidiaries, such as Alliance Air, Hotel Corporation of India, which owns the Centaur properties in New Delhi and Srinagar, Air India Air Transport Services and Air India Engineering Services, are not being sold — they will be transferred to a special purpose entity along with roughly a third of AI’s ₹48,781 crore outstanding debt. Effectively, the government is offering a majority stake in AI and AI Express with management control, as well as a cumulative debt burden worth ₹33,392 crore. For prospective buyers, the attractiveness of AI’s international flying rights and slots would be offset by the possibility of taking on so much debt and putting a plan in place to whittle it down or refinance the loans. Details of the reallocation of these liabilities between AI and AI Express, and the logic behind it, will only be shared with bidders at a later stage when requests for proposals are issued.

Given the uncertainties over its debt burden, it will not be a surprise if those bold enough to make a bid for AI find it difficult to offer a lucrative price to the government. It is worth pausing to see if serious investors are enthused by the government’s decision to retain 24% stake in the airline (which will possibly come with one or two bureaucrats nominated to the airline’s board of directors). In 2016-17, the airline suffered a net loss of ₹5,765 crore, owing mainly to its high interest costs. While debt has been the major reason for AI’s losses in recent years, operational inefficiencies and poor management have been bugbears for long. The government is expected to offload its residual 24% stake at a later date, pinning its hopes on a better valuation after the new owner has fixed the airline’s legacy issues. The real benefit of privatisation will be that the airline will no longer drain taxpayer funds, after thousands of crores have been infused over the years to keep it up and running. That its new owner would get some room to rationalise its large workforce a year after the transaction and the government is thinking of footing the bill for some benefits paid to retired employees, such as complimentary air tickets, sounds good. The government is understandably keen to close the AI sale transaction soon, preferably by early 2019, in order to bolster its reformist credentials. But investors will look for the finer details to ascertain the carrier’s true worth. 

The no-trust motion against Sri Lankan PM Wickremesinghe will test the ruling alliance

Nearly two months after its drubbing in the local government polls, Sri Lanka’s ruling alliance continues to be under enormous uncertainty, and Prime Minister Ranil Wickremesinghe now faces a no-confidence motion. Initiated by the “Joint Opposition”, a loose coalition of legislators supporting former President Mahinda Rajapaksa, it has been scheduled for a marathon 12-hour session in Parliament on April 4, to be followed by a vote. Tensions in the national unity government of President Maithripala Sirisena and PM Wickremesinghe bubbled over soon after the poll results, in which a Rajapaksa-backed party outdid the two major parties in power, the Sri Lanka Freedom Party and the United National Party. Many legislators from Mr. Maithripala’s SLFP blamed the PM for the poll debacle, and demanded that he resign. While Mr. Sirisena has not publicly endorsed the demand, his dissatisfaction with Mr. Wickremesinghe is no secret. An imminent split in the ruling alliance was averted with a cabinet reshuffle but the cosmetic changes have done little to cement it. Amid the tussle, Mr. Sirisena clipped Mr. Wickremsinghe’s powers last week, taking away the central bank, the policy-making National Operations Room and several other institutions from his control.

The JO claims it has about 55 signatures in support of the motion, and it has been trying to draw more support from the Sirisena camp, in which many remain keen to work with a new Prime Minister from his UNP while some are averse to even a tactical regrouping with the Rajapaksas. The Janatha Vimukti Peramuna, with six MPs, has said it will vote against the PM. With 107 seats in the 225-member parliament, the UNP-led front is the single largest group, and is confident of defeating the motion, counting on some support from the SLFP and the minority parties. The Tamil National Alliance, which has about 15 MPs, could play a crucial role, and is likely to either abstain or back the PM, rather than join hands with Rajapaksa allies. Going by the numbers, it seems Mr. Wickremesinghe will survive, unless last-minute negotiations change the game. If he were to be ousted through the motion, it may potentially set off consequences ranging from a parliamentary reconfiguration to the Cabinet being dissolved. If he stays in power, the government will still have the difficult task of reorienting itself to the mandate Sri Lankans gave this coalition in 2015. President Sirisena and PM Wickremesinghe, who are facing a serious credibility crisis at the moment, will have to put the interests of their constituencies at the top of their priority list and use the remaining two years of their government’s tenure to address the concerns of the vast majority of the population. For this, they must resist the temptation of myopic political manoeuvres and focus on the reform agenda they promised to deliver. The two leaders cannot afford to forget why Sri Lankans put them in power in 2015 in the first place.

Launch lessons: On ISRO's satellite launch problem

The loss of communication between the ground station and the Indian Space Research Organisation’s latest satellite after its launch on March 29 is deeply disappointing. ISRO’s mission aimed to place the communication satellite, GSAT-6A, in space. However, shortly after the second orbit-raising operation, the ground station lost track of the satellite on March 31, when it was on course for the final firing. Understanding why this happened is crucial. A launch operation can be simplified into the initial three stages, during which the satellite is boosted to different heights by the launch vehicle and then placed in a geosynchronous transfer orbit. This is an elliptical orbit into which a satellite is placed initially before being transferred into a geosynchronous orbit where it maintains a position above a fixed longitude. During each of these stages, a part of the rocket completes its role and disengages from the bulk. Then the satellite moves towards its final and desired orbit. The GSAT-6A was first raised to the elliptical orbit marked by the following parameters: its perigee, or point of closest approach to Earth, was 5,054 km; and its apogee, or point of farthest approach, was 36,412 km. This was followed up by a second orbit-raising operation on March 31. It was after this and during the third such operation that the ground station lost contact with the satellite. This is why it is being conjectured that the failure occurred because of a flaw outside the launch vehicle, the GSLV, perhaps from a short circuit or power glitch within the satellite itself.

The last word has not been said on the mission, as ISRO officials continue to try to establish contact with the satellite. Yet, in complex scientific feats such as ISRO’s projects, there is no mission so devoid of a learning aspect to it that it is deemed a total failure. The GSLV has had several successes in the past, and this is its 12th flight. For instance, it was used to launch the advanced communication satellite, GSAT-6, in August 2015. GSAT-6A’s predecessor, GSAT-6, provides S-band services for two-way communications as in the case of mobile phones. The present mission, launched on March 29, was endowed with additional features, such as the high-thrust Vikas engine that gave it the capacity to carry a heavier payload. It had been reported that the mission would be a testing ground for ISRO’s next moon mission. Given this background, ISRO should be open about the specific learning points from this launch exercise. Space science is exciting not just for the experts, but to many outside the field. Therefore, it is important that the agency presents itself more openly to the world.

Back on track: On GST e-way bill system

After an aborted attempt in February, the government has finally managed to successfully roll out the e-way bill system for tracking the movement of goods under the Goods and Services Tax net from April 1. No major execution challenges have been reported by businesses so far, and the IT backbone that generates the e-way bills — that are now required even before goods are loaded for transport — has so far held up without glitches. On the first two days of the e-way system, which included a Sunday, 5.5 lakh e-way bills were generated, and the GST Network has said that the system is now geared to cope with a much higher capacity. Equally heartening is the revival in GST collections, that had dipped to ₹83,716 crore in November 2017, after a fairly robust ₹90,000 crore-plus inflow for the first three months of the new indirect tax system. As per final data released by the Centre on Monday, collections for the three months since then are far healthier than initial indications suggested, with February recording ₹89,264 crore, the highest since September 2017. Finance Secretary Hasmukh Adhia expects collections to pick up further as the authorities get a better sense of who is regularly filing returns and paying taxes. His confidence reflects the government’s belief that analytics deployed on GST data compiled for nine months would deliver a bigger bounty, even as e-way bills make it tougher to avoid tax dues.


Everyone’s fingers are crossed that the e-way bill portal, which now has over 20,000 registered transporters and 11 lakh taxpayers, will hold up, going forward. It is important to note that since the system for tracking inter-State movement of goods was launched at the beginning of a financial year, the actual load that the portal will have to bear on a normal business day may be much higher than the initial trends. This is because many businesses had already moved and stocked up goods by March 31, ahead of the system kicking in, and are still completing usual year-end processes such as recording closing stock. A staggered schedule for rolling out e-way bills for intra-State trade in a few States at a time is expected soon. Given that India’s transport sector is still largely unorganised and many vehicle drivers are not fully conversant with the technical nuances, it is important that anti-evasion squads deployed to check e-way bills operate with a light touch to start with, and limit the frequency of inspections for goods moving across States. Else, the system could end up creating a bottleneck for transporting goods in a country where goods movement already takes inordinately long due to infrastructure deficiencies. A similar approach would be ideal for other anti-evasion measures in the pipeline, including the matching of invoices from buyers and sellers, and the reverse-charge mechanism (expected by June-end) under which large businesses would need to pay tax on behalf of unregistered small suppliers.

HARI OM NAMO NARAYANA

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A first step — on NDA govt.'s Ayushman Bharat

he NDA government’s scheme to provide health cover of ₹5 lakh per year to 10 crore poor and vulnerable families through the Ayushman Bharat-National Health Protection Mission has taken a step forward with the Union Cabinet approving the modalities of its implementation. Considering the small window, just over a year, available before the term of the present government ends, urgent action is needed to roll out such an ambitious scheme. For a start, the apex council that will steer the programme and the governing board to operationalise it in partnership with the States need to be set up. The States, which have a statutory responsibility for provision of health care, have to act quickly and form dedicated agencies to run the scheme. Since the NHPM represents the foundation for a universal health coverage system that should eventually cover all Indians, it needs to be given a sound legal basis, ideally through a separate law. This could be on the lines of legislation governing the rights to food and information. Such legislation would strengthen entitlement to care, which is vital to the scheme’s success. It will also enable much-needed regulatory control over pricing of hospital-based treatments. The initial norms set for availing benefits under the NHPM, which subsumes earlier health assurance schemes, appear to make the inclusion of vulnerable groups such as senior citizens, women and children contingent on families meeting other criteria, except in the case of Scheduled Caste and Scheduled Tribe households. The government should take the bold step of including these groups universally; the financial risk can be borne by the taxpayer.

Universal health coverage is defined by the WHO as a state when “all people obtain the health services they need without suffering financial hardship when paying for them”. With its endorsement of the Sustainable Development Goals for 2030, India will have to constantly raise its ambition during the dozen years to the deadline. This underscores the importance of raising not just core budgetary spending every year, but paying attention to social determinants of health. Affordable housing, planned urban development, pollution control and road safety are some aspects vital for reducing the public health burden. Unfortunately, governments are paying little attention to these issues, as the quality of life erodes even with steady economic growth. In some of its early assessments on the road to universal health coverage, NITI Aayog advocated a State-specific approach rather than a grand national health system to expand access. But the NHPM has a national character, with States playing a crucial role in its implementation, and beneficiaries being able to port the service anywhere. It is a challenging task to make all this a reality, and the government will have to work hard to put it in place.