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Will Modi’s Attempt to Turn Air India into a Professional Organisation Work?

The government failed to privatise Air India when its offer to offload its 76% stake in it drew a blank. Thereafter, the Niti Aayog advised the government to first turn the national carrier around and then sell it to get a decent price.

A recent report in Business Standard, quoting unnamed government sources, carries a fairly detailed account of what the Centre wishes to do to turn Air India around.

The idea is to give it an autonomous board and empower it suitably, thus enabling it to put in place a professional management. The board already has the benefit of the advice of top industrialists who are independent directors.

The aim will be to ensure that the suitably empowered autonomous board will get the company to stop making cash losses and therefore not need further government cash support beyond the current financial year. This is sorely needed because, over the five year period from 2012 to 2017, the carrier has posted a massive loss of Rs 27,000 crore and received capital infusion (cash to keep it going) totalling almost Rs 24,000 crore.

On the face of it, the autonomy proposed for Air India is impressive. The board will get extensive powers This is unexceptionable, conventional wisdom. With nobody willing to buy the long-term loss-maker, the government needed to have at least on paper a credible plan to turn the organisation around and justify putting more cash into it. Without the last, the organisation would go belly up as IL&FS has just done.

With elections just around the corner and nobody knowing what view the next government will take, there seems to be no reason to expect well-regarded private sector professionals to join the carrier and risk their CVs. Only those willing to take a risk to make a name as a successful turnaround specialist will think of joining the organisation.

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