How Tata-Air India deal boosts Modi government's other privatisation plan

Tata Sons-Air India Deal: In a major boost to the government's disinvestment plans, the Centre announced the first privatization after 19 years. As per the deal, Tata Sons will take over 'loss-making' Air India for Rs 18,000 crore. The transaction is expected to be completed by December 2021. With this transaction, Privatization 2.0 is likely to get a big boost and would be followed up with the rest of the planned divestments, said Motilal Oswal in its report.  

There are several government-owned entities lined up for privatisation. This deal is supposed to act as catalyst and facilitate other government disinvestment projects such as BPCL, Pawan Hans, LIC IPO, etc.

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With BPCL, Pawan Hans, Central Electronic Limited, Salem Steel Plant, SCI,  BEML, and Nilanchal Ispat Nigam Limited already in various stages of strategic divestment, there is likely to be further action on this front in this fiscal, said the brokerage.

'These Govt entities next in line'

"The government has a clear and well-stated intent of disinvestment in non-strategic sectors and minimum presence in strategic sectors. This augurs fairly well for other big-ticket divestment items on the agenda, such as BPCL, SCI, Pawan Hans, as well as LIC IPO. It is also looking to come up with expression of interests (EOIs) for IDBI Bank, RINL, Concor, HLL Lifecare, PDIL, and IMPCL for strategic disinvestment," said the report.  

The reforms such as Amendment of Retrospective Tax Laws, Bad Bank creation, Relief package for Telecom sector along (with further initiatives to reduce litigations), series of PLI packages, Farm Laws, etc. undertaken by the government will also go on a long way to push the Centre's disinvestment plans.

"The government has been in a major overdrive on reforms of late. Privatization was the missing link in this, which has now been plugged. The announcement of this just a few months ahead of five major state elections in early CY22 further underscores the political will of the government," underlined the brokerage.  

This also marks the first privatization of a PSU entity in India after 2002-03. The NDA-1 government had privatized nine PSU firms (Modern Food Industries, Balco, Hindustan Teleprinters, CMC, Indo Burma Petroleum Company, VSNL, Pradeep Phospates, Hindustan Zinc, and IPCL). The government had also sold stakes in 19 properties of ITDC and three properties of Hotel Corporation of India, the report mentioned. 

Air India was founded in 1932 by JRD Tata and was nationalised in 1953 under Air Corporation Act.