Some planes at last

Many years after the proposal was first mooted, the government has finally taken an important step towards approving the purchase of new aircraft by Indian Airlines. The long and tortuous process by which the proposal has finally got as far as it has, is a cautionary tale that tells us why the private sector is able so often and so easily to get the better of public sector rivals.

For even as Indian Airlines (and Air-India) have waited for years for permission to buy new aircraft and expand their fleets so as to exploit the opportunities thrown up in a growing market, their private sector rivals—both Indian and foreign—have been able to buy new aircraft and increase market share almost every single year.

Even now, Indian Airlines has to wait for final Cabinet clearance, while Air-India continues to wait in the wings. Indeed, Indian Airlines has been able to buy no aircraft after the late 1980s, and has had to cope with leased planes for fleet expansion while rivals like Jet and Sahara have built up much younger fleets of comparable size, starting from scratch.

It is well-known that the answer to the financial troubles that have plagued both the state-owned airlines lies in fleet expansion, so that the same infrastructure and staff can be used to service more passengers. So the delay has been financially crippling for both airlines.

Ironically, ministers and politicians of all hues swear by the public sector and vow to strengthen it, while their actions point to contrary intentions. Indeed, it is now conventional wisdom that the problems of the public sector have little to do with the quality of management and everything to do with a difficult shareholder, namely the government. So it should be a matter of relief that decisions are finally getting taken on aircraft acquisition—despite some ministerial foot-dragging under the guise of another review.

In this context, it is important also to review how the “navratna” concept is working. The giant public sector enterprises that came under this nomenclature were to be given operational autonomy, at the very least. But as is being seen in the petroleum ministry, this is not at all the case.

It is also common knowledge that the tactic of reviewing past decisions has been used often to derail the plans of public sector enterprises. In the telecom ministry, for instance, where each day of delay in the expansion plans of the PSU players in the late-1990s meant advantage to their fledgling private sector rivals as it gave them time to consolidate their presence in the market, a series of telecom ministers routinely used one excuse or the other to call for a review.

MTNL’s plans to expand into the fast-growing cellular telephony area were delayed by almost two years—the minister in charge even sought a CBI enquiry against the chairman and managing director who refused to bow to his wishes, only to be told by the chief vigilance commissioner that the charges were flimsy.

So, the day he retired, the CMD was sent a “letter of displeasure” by the ministry! What the public sector needs quite often is just a level playing field so that it can compete.