The Government is disinvesting from its loss-making hotels, and it must do the same with Air India. The national carrier should be leased to a third party, so that the state retains ownership but is not responsible for management
It is good that the loss making hotels are being disinvested. But what about the super loss maker Air IndiaIJ The hotels, in comparison to Air India, are only making nominal losses. It is a peculiar bureaucratic decision that lets the bigger criminal go scot free while catching the petty one.
Airlines are rarely a profitable business. It is wise for the State to stay away from this industry and function only as the overall supervisor. For Air India, the Government should consider leasing out the airline and sharing a part of the profit. This is a good way to have the best of both. The only problem is that this arrangement does not allow officials to exploit the national carrier.
Air India needs about Rs30,000 crore funding and an immediate investment of about Rs1,375 crore. There is, of course, no guarantee that it will ever be viable or that more of the people’s money will not be required to keep it afloat.
It is a prudent decision by the Government of India to disinvest 16 India Tourism Development Corporation hotels — eight of these have been incurring losses for many years, including the flagship Ashok Hotel in Delhi. Together their losses amount to Rs22.5 crore. losses are always a matter of concern. To that extent, the decision to divest is fine.
The hotels are in prime locations. These are cynosure for the eyes of any private business. The decision to lease out some of the loss-making units, including Hotel Donyl Polo Ashok in Arunachal Pradesh, is sensible.
Eight ITDC hotels, including the Janpath Hotel in Delhi, have recorded some profits. In the 1950s, the Government had to enter the the hospitality sector, as the private sector was lukewarm to virtually any kind of investment. The Government had to acquire land, build the necessary infrastructure to set the trend for world class business.
During the past decade- and-a-half, the Government has exited from many properties, which included some controversial decisions. However, this time the move is to divest without giving up the stakes. Thus, the Government will continue to hold these hotels while operational expenses will be borne by the lessee.
Not only does this spare the Government from incurring losses but, by leasing the properties, it helps generate revenue. Further, in case the lessee defaults and doesn’t deliver, the Government retains the option to change the lessee. In the coming years, except for overall supervision, the Government may not have to spend much on these ventures. Thus, while it exits the industry, it continues to earn.
However, the Tourism Ministry has decided to retain the highest loss-making Ashok Hotel in Delhi as it is strategically located and is the flagship hotel. Hopefully, the ITDC will have plans in place for the revival of the five-star property within one year. Meanwhile, it seems like the Ministry has done its study well to take the disinvestment decision. If implemented properly, there would be less chance of a controversy as it happened before.
Technically, the Government will continue to hold the silver and also earn, instead of losing, some money. Another aspect that the Ministry has to take care of is how best to use the large tracts of land these hotels hold, including for some joint ownership cases such as the Brahmaputra Ashok in Guwahati. Though this may not be considered the best business model by many, it is a sensible plan.
Similar prudence needs to be exhibited in ventures such as Air India. Till the early 1950s, the Government did not have an airline. Air India was a Tata venture, which the Government decided to nationalise. There has been in profit, at least on paper, for some time. Most of the time during the past almost six decades, this airline has been besieged by problems, and losses were its regular feature for many reasons.
Air India was termed a bottomless pit even when it was in its heydays. For some unknown reasons, the Government has pumped enormous sums into this so-called prestigious venture. Having opened up the skies to competitors like Etihad and Air Asia in the international sector, and numerable private operators in the domestic operations, Air India is certainly is no more a strategic affair.
People seem to have tremendous faith in Prime Minister Narendra Modi for taking out-of-the-box decisions. One such decision for Air India would go a long way. It needs to be leased out to anyone — Indian or foreign — on an annual lease fee.
This will save the Government of bothering about a sector from where it is prudent to move out. Additionally, it will make the competition intense and the common fliers are likely to benefit with the possibilities of less operational cost and fare. This is all the more necessary as the public debt of Union Government is increasing.