Economic Highlight
New Delhi, 11 October 2021
Govt.
Offloads Air India
POWER
CRISIS NEW JOLT
By
Shivaji Sarkar
The sale of national
carrier Air India, eight-year tax reprieve to Tatas, a severe power crisis that
may give a jolt to industry and agriculture and the stepping down of Chief
Economic Advisor K Subramanian gives a new twist to the economy. It’s not an
easy situation to steer through.
The country may finally
heave a sigh of relief as it hives off an airline with over Rs 70820 crore
losses as on March 31, 2020, combined debt of Rs 61,562 crore. The Tatas
virtually take the assets over for a cash of Rs 2700 crore. It does not get the
Air India tower at Nariman Point in Mumbai. Its Air India businesses would be funded
from its future tax savings.
Of the total debt, the
Tatas take over Rs 15300 crore and the remaining Rs 46262 crore will be repaid
by the AI Assets Holding through monetising of Rs 14,000 crore assets that are
not given to Tatas, including Air India tower, and the rest will be paid
through government revenues. Since 2009-10, the government has pumped in Rs
1.10 lakh crore to support the airline.
Tatas effectively
takes over AI, AI Express and 50 per cent of cargo handler AI SATS Airport
Services for Rs 2700 crore in cash and the rest is adjusted against its debt
takeover of Rs 15300 crore. No wonder CEA in his exit statement avers that he
served “a period of tremendous uncertainty and epochal change”.
The addition to AI to its portfolio gives Tata a
significant leg-up in its international operations as it gets access of 1800
international landing and parking slots in India and 900 slots at airports
overseas. It also gets 4400 domestic slots.
The country
effectively reduces the recurring losses. For eight years, Central Board of
Direct Taxes allows Tatas not to bother about the taxes as these would be
adjusted against losses Tatas are sharing. Still nobody knows why AI and Indian
Airlines merger in 2007-08 by the UPA government led to continuous losses to a
moderately profit maker. This was marked by a process of allowing many
profitable routes to its competitors.
The power crisis is
also unique. Almost entire generation is in the public sector while
distribution and revenue earning has been virtually hived off to the private
sector. With coal shortage, despite high reserves, it is to hive off profits,
increase costs as coal prices rise internationally. It would heap a heavy cost
on all activities as the tariff has to increase, add to severe inflation and
cause production losses at a time when the country post-pandemic needs to move
faster. The problem accentuates as petroleum crude prices also going beyond $
77 a barrel. There could be more job losses against recent hopes of adding to
employment.
Even Air India sale
would have repercussions on the 12,085 AI plus 1,433 employees of AI Express
jobs for a year. After that Tatas can decide on the terms and effectively that
means large number of people would exit and new fewer new jobs would be created.
The private sector has virtually tailored its operational strategy on fewer
staff, long working hours and less concomitant benefits and It has not emerged as model employer with hire
and fire being the rule causing extreme uncertainties in the society.
That does not mean
that the decision to hive off is not proper. It raises questions on why the
2007-08 merger happened and who was responsible for it. The country may have to
decide on the process of decision-making, without a public discussion.
The power sector is
going through such a crisis. Since Independence, despite the Pandit Jawaharlal
Nehru government offering to the private giants, no private sector has tried to
get into the critical power generation. India is the world's third largest producer and third
largest consumer of electricity. The national electric grid in India has an
installed capacity of 388.134 GW as of 31 August 2021. Private sector is
marginally there.
India being the highest consumer of coal, as it
reaches the international market, coal prices shoot up. Recently it has
increased by 40 per cent. During the pandemic, when crude prices fell to its
lowest, it is shooting up now and this is turning into a global crisis. The
international agencies are concerned and it may lead to another shock
post-2007-08 Lehman meltdown. It means for 12 years the globalised economy
could not come out of a crisis.
Another shock is the more the globe gets ‘smaller’ and
supposedly integrated more it is getting into different kinds of economic
shocks. More it is digitised, more is the crisis. The model of activity in the
digitalised world has changed. It has moved out of production-linked market to
service and finance-oriented secondary operations. World over there are efforts
to reduce on manpower but aim at high growth. The impractical is happening and
causing social instability.
This is in contrary to the model of employing larger
number of people and empowering them for social good even at financial losses.
It has changed to the opposite – minimum jobs and not bother much about the
social distress, working conditions. The Air India interestingly enough fits
into this bill.
The troubled national carrier has earned
the dubious distinction of being an airline with the highest number of
employees on its rolls per aircraft as it has been hiring staff to oblige
political bosses. The AI has the
highest 221 worker per aircraft. British Airways has 178 employees per
aircraft, 140 by Singapore Airlines and Lufthansa has 127. So a cut in jobs is
natural. While such high employment ratio looks impractical, the lows that many
are adopting also are problematic and that to at low wages. These include some
of the highest degree holders in various private sector jobs or contractual
jobs in public sector.
The Tata takeover may have many emotional moments such
as its creation by Jamshedji Tata in 1932, in 1953 and the government takes it
over and after a long roller-coaster journey once again it goes back to Tatas.
This is a lesson for countries to learn that the system has to be mixed. Public
sector is needed and cannot be wished away as the present power crisis
demonstrates. Similarly, private also has to exist for overall development.
None should be given the extra weightage. ---INFA
(Copyright, India News & Feature Alliance)
|