Is Air India deal such a big deal?
Is Air India deal such a big deal?

By Manish Tewari

Let me commence this piece with a caveat. I have been a principled opponent of the Air India disinvestment process. That automatically does not make me a supporter of decades of mismanagement and malfeasance that had plagued Air India. I believe the public sector has a role in the Indian economy—even in running an airline.

If the Government of India can run the world’s fourth largest railway network, it is hypocritical to even argue that the government should not be in another facet of the transportation business—Airlines. Then why not privatise railways and state transport undertakings—buses—as they also make losses and run on the state’s largesse if the logic behind Air India’s privatisation is that the government should not be a player in the transportation sector. Why Air India was singled out for special treatment still remains an enigma.

Selling assets, brands, and businesses created out of public money to a private entity, even if it is India’s most respected corporate entity, is morally repugnant and ethically reprehensible.

What compounds the travesty was that the government squared up ₹61,131 crore of Air India’s debt and other liabilities upfront before transferring it to Tata Sons for a measly cash payment of ₹2,700 crore. Tata Sons took ₹15,300 crore of Air India’s remaining debt, which it promptly refinanced by bringing in new lenders. For all intents and purposes the government virtually gifted Air India to the Tatas. It almost seems like an invisible hand or an ideological sledgehammer was driving the sale of Air India.

I have long argued in myriad articles over the years that Air India was a ₹5 lakh crore company that is being sold for less than a song by utilising sophistry to justify an extremely discounted valuation.

My repeated questions in Parliament asking for details of the disinvestment process, including and not limited to the details of how the valuation was undertaken, the benchmark price arrived at, the process to be followed for selling it, the parties interested in purchasing it, and the relative offers by these interested entities was met with obfuscation and sophism—all these questions are on the PRS website.

Suppose Air India was such a basket case that it had to be taken off the government’s hands at whatever price a garage sale would fetch. Why is it that the buyer of Air India decided to invest a ballpark of between USD 80–140 billion (₹6.60 to ₹9.60 lakh crores) in buying 470 aircraft from Boeing and Airbus with the option of purchasing 370 more, in all 840 or above over the next eight to 10 years?

Obviously, the company had great intrinsic value waiting to be unlocked, not limited to its brand alone, but lucrative global routes, parking slots, bilateral rights, fifth freedom and grandfather rights that it has across the globe. A failed, discredited, rejected or even ‘damaged goods’ that Air India was vilified as over the decades to prepare the ecosystem for its eventual offloading does not seem to be even remotely the case if the purchaser decides to put in close to USD 80–140 billion over a decade within a year of taking it over.

The fact that the deal was greeted with paroxysms of euphoria by the presidents of the United States and France and the prime minister of the United Kingdom should come as no surprise because the deal would pour in much-needed liquidity into their respective economies but, more importantly, create real jobs at a point in time when recession looms large over the horizon and automation, robotisation and artificial intelligence are completely transforming workspaces across the manufacturing sector. Surprisingly, President Xi Jinping did not chime in his exultation as both Boeing and Airbus also have a significant manufacturing footprint in China.

With typical American candour, President Joe Biden bluntly underscored that “this purchase will support over one million American jobs across 44 states, and many will not require a four-year college degree.” Prime Minister Rishi Sunak of the United Kingdom was equally forthright when he stated that the aircraft order would create better-paid jobs and new opportunities (read employment opportunities) in manufacturing hubs from Derby to Wales, which will help the UK’s economy to grow and support our agenda to level up. The UK manufactures the wing of the Airbus, and the Rolls Royce XWB engines will power the Airbus A350 aircraft.

While French President Emmanuel Macron tried to peg the Tata Sons and Airbus contract as a mark of confidence in French industry and as a new phase in the Indo-French strategic partnership, the employment spin-off is a given in France’s case since it is one of the principal players of the Airbus manufacturing consortium.

What will this USD 80–140 billion do for the Indian economy in terms of manufacturing jobs? Practically nothing is the short answer, for both Boeing and Airbus have a token, if not symbolic, manufacturing presence in India, which does not seem to cater to the type of aircraft ordered.

Of course, some service sector jobs may get created: Pilots, cabin crew, ground staff, maintenance, repair and operations (MRO), etc. However, given Air India’s aggressive personnel downsizing, that may not even be the case. In any case, from the most optimistic best-case scenario, it would be nowhere close to the employment and technological upgradation benefits accruing to the US, the UK, France, China and even South Korea.

Will the deal bring any strategic benefits, i.e., help India get a seat on the UN Security Council, the Nuclear Suppliers Group membership, etc.? The answer is again no. For decades India has been buying defence equipment and other capital-intensive goods like aeroplanes from around the world. Every prime minister has desired to leverage these big-ticket purchases into geo-strategic capital. However, all we have got is platitudes. It will be no different this time, and even the rhetoric by the beneficiary nations this time around has been more of patting themselves on the back for a great job done in procuring Indian business rather than thanking India for the vital employment and technological input into their economies.

What will this USD 80–140 billion do for the Indian economy in terms of manufacturing jobs? Practically nothing is the short answer, for both Boeing and Airbus have a token, if not symbolic, manufacturing presence in India.

(The writer is a Lawyer, MP and former I&B Minister)