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WITH THE PLANNING Commission group making recommendations on FDI, attention has shifted to the civil aviation sector, the basic issue being whether foreign investors should be allowed to hold more than 50 per cent of the equity in Air-India and Indian Airlines, and if foreign airlines can hold a part of this stake. Admittedly, the Planning Commission panel's recommendation should not raise much dust because what it specifically suggests is that FDI in civil aviation should be raised from 40 per cent to 49 per cent, without making any reference to the foreign airlines-holding issue. Even so, those opposing the reform moves will see in the latest recommendation a renewed threat, and it will not be surprising if fresh attempts are made to nip all such efforts in the bud.

Clearly, the FDI proposals are bound to rake up once again the issue of disinvestment of the two national carriers. Of course, given the controversy over the disinvestment of HPCL and BPCL it is more than likely that the Disinvestment Minister, Mr Arun Shourie's plans for the two airlines — sell 51 per cent stake in IA and 60 per cent in AI by end March 2003 — are unlikely to unfold the way he wants them to. This, in effect, means that all attention must now be diverted to improving the functioning of the airlines which, to say the least, face an uncertain future even without the sword of disinvestment hanging over them. Admittedly, there is some movement towards revamping the operations and the `image' of the two airlines, the Civil Aviation Minister, Mr Shahnawaz Hussain, going on record that "there has to be investment before disinvestments". Though this would mean pushing back the disinvestment plan by some years, the more important question is to ensure that the investment being planned is channelled into the most productive lines. Consider fleet expansion which is critical for both IA and AI. Not merely the numbers (a strong competitive point with other airlines) but the mix of aircraft should also be right; this can make or break an airline given today's specialised requirements of servicing different destinations. Thus, AI had had to move out of several destinations, including Australia, South Korea and Canada, as it did not have the right type of aircraft.

It is clear that without the Finance Ministry's support (the bill would total nearly $4 billion) the airlines will not be able to go ahead with their fleet modernisation plans. This is an important hurdle, but only one among many. The latter includes the Civil Aviation Ministry's move to "operationally synergise the two national carriers" — a sensible policy approach but only if the disinvestment alternative has been ruled out, which is still not the case. To say this, however, is not to discourage the Ministry's move to engage a consultant to explore ways to outsource all `non-core' activities such as engineering, overhauling, housekeeping, and accounting. This would, among other things, offer the immense benefit of whittling down the huge workforces of the two airlines (about 17,000 for AI and 22,000 for IA).

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