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strategic disinvestment of CPSEs

NITI Aayog till now has recommended disinvestment of a large number of

government run companies, including Air India.
NITI Aayog was assigned to analyse and recommend possible disinvestment 115 CPSEs
(Central Public
Sector Enterprises). basic philosophy of recommending
Disinvestment by NIti Ayog-
is largely based on the fact that other than in strategic areas, say defence, there
is no rationale for the government to be in the business of being in business.

NITI Aayog was first asked by the government to examine the cases of 74 sick,
loss-making and non-performing CPSEs. After a detailed analysis, It
recommended closure of 26 such CPSEs. Of those, 16 companies have either
received cabinet approval (for closure) or are in the process of liquidation. So,
the government has moved very fast on the recommendation of NITI so far as
sick, lossmaking, non-performing CPSEs are concerned.

NITI Aayog was also asked (by the government) to function like a disinvestment
commission. So far, it has submitted four tranches of recommendations on
strategic disinvestments. Over all, 38 CPSEs plus four units of
two CPSEs have been recommended for strategic disinvestment. The Cabinet
Committee on Economic Affairs (a PM-chaired committee currently with 11
cabinet ministers as members and three as special invitees) has already given
approval to 23 of those companies that we had recommended for
disinvestment.According to NIti Ayog The government should spend money on health,
education, nutrition and improvement of social indicators. So businesses are best left to
the business people. The government should be there only in areas of strategic
interest, where its presence is absolutely necessary. The others should be left to the private
Among all your recommendations, the one on Air India has been the most
talked about.
According to NITI Ayog
If the government continues to run Air India, a vast amount of resources will be
required immediately. The airline cant go on like this. We calculated that Air
India would need an investment of about Rs. 30,000 crore. After very detailed
examination, it was felt that, given a choice between the governments
investment on infrastructure vis-a-vis social sectors and given that Air India has
just 14% of market share, its best that the private sector runs and manages Air
India in a far more efficient and cost-effective manner.
I must add that Air India has seen some turnaround in the recent past; its
making an operating profit. But the issue is, it cant function efficiently for long
without further investments from the government. Given that huge investments
are required for Air India, the case merited strategic disinvestment. I think the
damage was done when Air India and Indian Airlines were merged (in 2007).
The systems were not properly laid out; there were a number of staff issues;
and when all those continued for years, it led to the airlines declining
performance. So, the recent turnaround is not adequate enough for Air India to
continue in the present form. The private sector can very well manage Air India
as it had happened with many other airlines.
The stock market lacks adequate knowledge on the subject. Air India is sitting
on a number of very good routes. It does not have excessive staff. It has very
good planes. It has good landing rights, and many other assets. So from any
investors viewpoint, Air India is a very good asset.
Arent you foreseeing any opposition from the trade unions and others on
disinvestment proposals on Air India and other companies?
Actually the staff will be much better off, at least in the long run.

Air India is a loss-making, debt-ridden company; but why has NITI Aayog
recommended sale of profit-making ones, like the Shipping Corporation
of India (SCI)?
Its not a question of loss or profit. The question is whether the presence of the
government is absolutely necessary in a particular sector or not. The
government should get out of profit-making companies at the right time so that
it gets a good value.