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INTERVIEW | DIPAM Secretary: Had govt retained Air India, aviation sector growth would have been constrained

Speaking to Moneycontrol, DIPAM Secretary Tuhin Kanta Pandey was confident that his department will be able to privatize a number of PSUs including BEML, Shipping Corp, NINL, Pawan Hans, CEL and BPCL before March 31, 2022.

October 11, 2021 / 11:50 AM IST

The process of selling national carrier Air India has almost concluded, with Tata Sons emerging as the highest bidder. This will be the first privatization of a state-owned entity in nearly two decades.

It is thus natural that Tuhin Kanta Pandey, Secretary of the Finance Ministry’s Department of Investment and Public Asset Management (DIPAM), is confident that a number of other pending privatization plans can be concluded this financial year.

Speaking to Moneycontrol on October 9, Pandey expressed faith that his department will be able to privatize a number of PSUs before March 31, 2022 and meet the steep divestment target of Rs 1.75 lakh crore.

“The ones I am confident about are BEML, Shipping Corporation of India, Neelachal Ispat Nigam Ltd, Pawan Hans, Central Electronics Limited and Bharat Petroleum,” Pandey said.

Stressing upon the taxpayer money that would be saved from selling the loss-making airline, Pandey said that had the government retained Air India, it would have hampered further growth of the aviation sector. Edited excerpts:

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How important is Air India’s sale as a reform initiative?

I think it is a very big deal because it is the first privatization after 19 years. The last one, Paradeep Phosphate, was done in 2002. Second, it has got a lot of implications in terms of government revenues and also reduces the burden on the exchequer. Third, Air India was not able to grow and market share for global air travel from India was being lost to other airlines. No open economy can sustain itself unless it has a competitive international airline with a hub inside the country. But for that, a lot of investment and professional management is required.

The government has hundreds of things to look after, from farmers to the social sector to health, education and others. Running and growing an airline is not something it should be doing. Nobody can expect the government to put in more money when we have so many other priorities.

We have not been able to do a turnaround plan. Rs 1.10 lakh crore has been put into the airline and still we have Rs 20 crore a day loss. This transaction is not really about the money you can get but the taxpayer money which is being saved. If we had continued to retain Air India, then we would be constraining growth of the aviation sector, which is not commensurate with the growing aspirations of the Indian economy.

Most of the Rs 18,000 crore deal is Tata taking on Rs 15,300 crore debt. The cash component is only Rs 2,700 crore, which does not add much to the steep divestment target for the year.

If you are only looking at it from a narrow lens of divestment proceeds, then you are not looking at the money saved. I think that opportunity cost has to be applied in this case. If you could probably extrapolate, you can imagine what amount of money the government would have put into the airline over the next ten or so years had it retained Air India.

Looking ahead, what are your plans for the remainder of FY22, and which privatization process are you confident of concluding?

Our role focuses on implementation and conclusion of ongoing transactions while we prepare certain transactions for the next year. It is a 9-12 month cycle from expression of interest to completion. If you recall, just before the pre-Covid period, we had a series of EOIs, which we had to put on hold. We want to conclude these pending transactions by the end of March 2022. That's what our focus is.

The ones I am confident about are BEML, Shipping Corporation of India, Neelachal Ispat Nigam Ltd, Pawan Hans, Central Electronics Limited and Bharat Petroleum.

Does the same confidence extend to the initial public offering of LIC Ltd?

LIC’s IPO will conclude in the January-March FY22 quarter.
Arup Roychoudhury

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