Wednesday, February 1, 2017

Economic Survey highlights difficulties in PSU privatisation

THE Economic Survey 2016-17 presented in Parliament on January 31 by Finance Minister Arun Jaitley said that there is still a commitment to make the "perennially unprofitable public sector airline" a 'world class' entity. Citing civil aviation as an example, the survey said privatisation of PSUs remains difficult even for PSUs with a strong case to be privatised, though the reform...
talks in the sector is animated by discussions of as much "an interventionist as liberalising spirit" as reflected in restrictions on pricing.
Though the survey didn’t name Air India directly, the apparent reference is to national carrier Air India -- which is staying afloat on a Rs 30,000 crore financial package extended by the government for a ten-year period ending 2021-22. While there have been clamours to privatise the airline, government has so far desisted from taking a view in this regard.
Air India, which made an operational profit of Rs 105 crore for the first time in a decade in the 2014-15 financial year, is trying to stay afloat and revive its fortunes amid intense competition posed by domestic as well as international carriers.
The survey further said, "All states, all societies, have some ambivalence toward the private sector".
The basic objective of private enterprises -- maximising profits - does not always coincide with broader social concerns, such as the public's sense of fairness, the Survey said while adding that the ambivalence in India seems greater than elsewhere.
Noting that this ambivalence toward the private sector is manifest in multiple ways, the survey said the most well-known example is the difficulty of privatising public enterprises, even for firms where economists have made strong arguments that they belong to the private sector.
"Consider the civil aviation sector. Defying history, there is still the commitment to make the perennially unprofitable public sector airline 'world class'," it said.
The Survey said that recently, airport privatisation has taken the form of awarding management contracts rather than change in ownership. Seen as partial privatisation, the government recently invited bids for handing over terminal building operations of airports at Jaipur and Ahmedabad to private players. The move followed unsuccessful attempts to fully privatise these aerodromes.

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