By Anjan Roy
It was a paradigm shift for the Indian aviation industry, as well as for India’s economic policy in general, when on Friday the Tata Group was adjudged the winner for the bid to take over the beleaguered national airline, Air India.
Nationalisation of the airline services in 1953 was an integral chip of socialistic thinking that shaped the Indian economy in the decades following Independence.
There were lengthy debates behind the scenes and these are recorded in the epistolary exchanges between the then prime minister of India and the head of the Tata group which owned Air India.
Leafing through the letters of those times when airlines industry was being nationalised, one gets a vivid sense of what a matter of faith it was with the dramatis personnae on the opposing sides: the then prime minister Jawaharlal Nehru and JRD Tata, chairman of Air India and head of the Tata Group.
Immediately after the decision on nationalisation of the airlines industry, the then prime minister Jawaharlal Nehru had written a letter to JRD Tata chairman of the Tata Group, who had steadfastly opposed the idea, thus:
“This matter of air services in India has been discussed by s in Cabinet and outside on a very large number of occasions. As a matter of general policy, we have thought that transport services of almost all kinds should be State-owned”.
Tata had offered to Nehru an alternative arrangement for the air services industry and see him with his colleague Mody. Nehru and JRD, although good friends at the personal level, had drifted over time.
JRD recalled, “Nehru once told me ‘I hate the mention of the word profit’. I replied, ‘Jawaharlal, I am talking about the need of the public sector making a profit!’. Jawaharlal came back: ‘Never talk to me about the word profit, it is a dirty word”.
Decades later, JRD had same to the conclusion: “Nehru was an ignoramus in economic matters and he insisted on the business of socialism”.
Privatisation of Air India, when it was reeling under a tremendous burden accumulated loss, was thus not a single case of disinvestment by the government. It was the reversal of one of the basi tenets of that kind of economic policy, which is known as Nehruvian socialism. Friday was a day when a historical wrong was set right.
Although the industry was nationalised in 1952, the government had retained the services of JRD Tata as the effective head of the company. There was sadness for JRD, but not animosity.
The government had retained the services of JRD Tata as chairman of the nationalised Air India and JRD devoted his sincere attention to maintaining the standards of the airline he had so lovingly nurtured. This continued till 1978, when he was suddenly removed and the decision was conveyed to him over telephone by the incoming new chairman, Air Marshal P.C. Lal.
The way he was removed was the most unkindest cut, and, once again, he had written a letter to the then prime minister, Morarji Desai, who had personally taken this decision. JRD wrote:
“I hoped youu will not consider it presumptuous of me t have expected that when the government decided to terminate my services and my 45 years’ association with Indian civil aviation, I would be informed of their decision directly and, if possible, in advance of the public, instead of the news being communicated to me by my successor..”
Before this, Tata had met Morarji Desai only a month back at Delhi and there was not a whiff of this development or Desai conveyed anything of the plan, JRD had mentioned in his letter.
JRD Tata might be having a quiet laugh now in his other world.
Air India was started by JRD Tata in 1932, when he had brought two small aircraft s his personal baggage on board the ship he was travelling from Europe.
JRD operated the first flight as a mail carrier between Bombay and Karachi and had tragically described his flights in his autobiography. The airline had become a full fledged carrier in 1946 when it started its international flights.
There is every reason to believe that the present-day Tata Group is betting high assuming a huge risk while taking over Air India. Maybe, even that Air India was so much in the DNA of the Tata corporate house once, the Tatas have a sentimental attachment to the entity. This is possibly not a hard core business decision.
Tatas are getting saddled with the burden of a loss-making badly managed company when the industry in which it operates is in doldrums. There is hardly an positive signals around that the aviation industry will flourish in the medium term, let alone quickly. The financing of the company itself could become a crushing load.
The airline had notched up liabilities of over Rs1 lakh crore and recurring losses which made it inevitable that it would have been closed down had there been no clear winner in the privatisation offer.
Tatas will get Air India and several associate companies, including Air India Services, which offered ground services. It will get Air India Express, a budget airline, and Air Asia.
With Air India in its bag, the Tatas would be obliged to do a corporate restructuring of its airline businesses. It already owns Vistara, a full service Airline with Singapore Airlines as partner. With Air India, they will have to drop some old associations and rationalise operations.
Of the Tata bid of Rs 18,000 crore, Rs 15,300 crore for debt and Rs 2700 crore would be win cash. The airline has total debt of above Rs 61,000 crore.
The Tatas would acquire the company as it is with its employees, and its intangible assets. These include the valuable landing rights in various airports across the world, including the traffic hubs like London Heathrow and New York.
Air India has 4,400 domestic landing rights and 1800 international landing rights, apart from parking rights running into 800 sites.
Besides, Tatas will also be transferred the Air India logos which are valuable assets, with the proviso that these could not be transferred to anyone but an Indian citizen. The lock-in period for the logos would be five years.
As part of this historic reversal, maybe, many more relics of the old order would also be cast out. India will now enter a period of what was once articulated as “animal spirit” of new capitalism. (IPA Service)