Should the Government Bail-out Air-India?

 

So, finally Government of India (GoI) agreed to bail-out a loss making PSU monster AIR INDIA (AI). Well, they call it financial restructuring. In means a substantial cut in interest on AI loans and improving operational efficiency and implementing the turnaround plan.

And you know how well GoI executes its plans.

Should the GoI bail-out an inefficient national carrier?

Is this the same Government that refused to bail-out a private air company?

Why don’t the same logic is applied to a PSU? And plz don’t say that being a national carrier it is our pride  and all such emotional stuffs!!!!!

You know India is country that needs money in good projects, not to infuse money in a loss-making PSU which is in ICU.

Why should GoI not bail-out is that you know GoI can reduce its fiscal deficit through disinvestment proceeds. First, it can stop infusing public money to bleeding PSU company which majorly caters to  the needs of BABA-NETAs. Secondly, it can sale this company and get some money. Since GoI is putting money to the tune of Rs 30OOO Crores, the disinvestment proceeds will be at least equal to that. It means it can reduce fiscal deficit by Rs 60000 Crores. It is such good chance to correct its fiscal slippage.

And by agreeing to save AI, the GoI has not shown any serious commitment to reduce its fiscal deficit.

Now think of the macro-economic implications of this exercise: A reduced fiscal deficit means higher rating by rating agencies (which implies that country's  macroeconomic situations remain stable or good), second it will less crowd out private investment (remember, liquidity is some what tight, though it has been infused by the recent RBI rate cuts). And importantly, it would help reduce inflation.

After all, I don’t understand why we have to be bail-out AI? Is there any compelling reason?

PS: Chetan Bhagat has a piece on ToI.

PPS: When it comes to saving a loss-making PSU, GoI takes decision less time compared to starting the much needed reforms.