The CBDT allows Tatas not to bother about taxes for eight years as they would be adjusted against losses that Tatas are sharing

The sale of Air India (AI), an eight-year tax reprieve to Tatas,  a severe power crisis,  and the stepping down of Chief Economic Advisor K Subramanian give a new twist to the country's economic affairs.

It is not an easy situation to steer through. The country may heave a sigh of relief as it hives off an airline with over Rs 7,0820 crore losses as on March 31, 2020 and a combined debt of Rs 61,562 crore.

Of the total debt, the Tatas take over Rs 15,300 crore and the rest will be repaid by AI Assets Holding through monetising of Rs 14,000 crore assets that are not given to Tatas, and the rest will be paid through government revenues.

Tatas effectively take over AI, AI Express and 50 percent of cargo handler AI SATS Airport Services for Rs 2,700 crore in cash and the rest is adjusted against its debt takeover of Rs 15,300 crore.

No wonder the CEA in his exit statement avers that he served "a period of tremendous uncertainty and epochal change".

The country effectively reduces the recurring losses. For eight years, Central Board of Direct Taxes allows Tatas not to bother about the taxes as these would be adjusted against losses Tatas are sharing. Still, nobody knows why AI and Indian Airlines merger in 2007-08 by UPA led to continuous losses to a moderately profit maker. This was marked by a process of allowing many profitable routes to its competitors.

The power crisis is also unique. Almost the entire generation is in the public sector while distribution and revenue earning has been shifted to private hands. With coal shortage, despite high reserves, it is to hive off profits, increase costs as coal prices rise internationally. It would heap a heavy cost on all activities as the tariff has to increase, add to severe inflation and cause production losses at a time when the country post-pandemic needs to move faster. The problem accentuates as petroleum crude prices also going beyond $77 a barrel. There could be more job losses against recent hopes of adding to employment.

Even AI's sale would have repercussions on the jobs of 12,085 AI and 1,433 AI Express employees for a year. After that Tatas can decide on the terms and that effectively means a large number of people would exit and fewer new jobs would be created. 

That does not mean that the decision to hive off is not proper. It raises questions on why the 2007-08 merger happened and who was responsible for it. The country may have to decide on the process of decision-making, without a public discussion. The power sector is going through such a crisis. Since Independence, despite the Pandit Jawaharlal Nehru government offering to the private giants, no private sector has tried to get into the critical power generation. Despite stress on green energy and rise in solar generation, it still remains nascent and thermal, coal-fired, power remains the mainstay.

India being the highest consumer of coal feels the pinch when prices shoot up.

Importing more coal to make up for domestic shortages is not the option at present. If this happens the costs as higher tariff would be passed on to the consumers causing prices to rise more.

Another shock stems from the fact that the model of activity in the digitised world has changed. It has moved out of production-linked market to service and finance-oriented secondary operations. World over, there are efforts to reduce on manpower but aim at high growth. The impractical is happening and causing social instability.

This is in contrast to the model of employing larger number of people and empowering them for social good even at financial losses. It has changed to the opposite - minimum jobs and no bothering about social distress or working conditions. The Air India case, interestingly enough, fits the bill.

The troubled national carrier has earned the dubious distinction of being an airline with the highest number of employees on its rolls per aircraft as it has been hiring staff to oblige political bosses. AI has the highest ratio of 221 worker per aircraft. British Airways has 178 employees, 140 for Singapore Airlines and Lufthansa has 127.  So, a cut in jobs is natural. While such high ratio looks impractical, the lows that many are adopting also are problematic and that too at low wages.

While one may feel happy with the sale of AI, it has to be realised that solutions cannot be achieved by mere selling of assets.

(The writer is a senior journalist. The views expressed are personal.)