Ranchi is Running to Stand Still


January 21, 1994.

Govinda is the reigning kind of the Hindi film industry. His latest film Raja Babu has just arrived.

The first day first show is playing at the Sujata Cinema, the biggest movie theatre in Ranchi, at that point of time. I happen to be there along with a bunch of friends.

It’s around one PM. The house-full crowd is rather subdued. The movie has dragged on for nearly two hours.

And then as often happened in David Dhawan movies, Govinda and Karishma Kapoor, the heroine of the movie, for no rhyme or reason whatsoever, start to dance to a song.

The song on which they are dancing, happens to be sarkaaye leyo khatiya jaada lage, one of the biggest hits of the 1993 and 1994. The crowd at Sujata Cinema is in raptures. There are whistles and catcalls and people are dancing in the aisles. The paisa vasool movement for which many of whom had lined up at eight AM in the morning for an 11AM show, has come.

December 21, 2018.

It’s a cold and a hazy December morning. I happen to be in Ranchi for the 25th anniversary celebrations of the class of 1993 of St. Xavier’s School. Not much is scheduled for the day with the festivities starting only in the late evening. There is time to kill.
Carnival Cinema, one of the many multiplexes to have opened up in the city, since I left it in late 1999, is playing Shah Rukh Khan’s latest release Zero. I walk in and buy a ticket which costs Rs 150. In 1994, a dress circle ticket at Sujata Cinema, cost Rs 11, the most expensive in the city back then. The popcorn cost two bucks more.

SRK in 2018, does everything that Govinda did in 1994, except for singing a double meaning song. He sings. He dances. He tries to woo the heroines. He even goes to Mars. But all this doesn’t impress the audience.

There is no whistling. No catcalls. And no dancing in the isles. All I get to hear is intermittent clapping of the kind the 1994 audience indulged in, when it was bored.

The cinema audience has been gentrified.


In 1999, Ranchi did not have a single multiplex. Now, the big multiplex chains, PVR, Carnival, Fun Cinemas etc., all have presence in the city. The heydays of single screen cinemas is over.

Sujata Cinema (now known as Sujata Picture Palace) is a shadow of its former self. Shree Vishnu Cinema, the one closest to St. Xavier’s College in Ranchi, where I studied, is now a hotel.

It’s at Shree Vishnu Cinema, I realised how big a star Mamata Kulkarni was in the 1990s. When she sang Chudiyan Bajaoongi, Prem Dhun Gaoongi, on the big screen, an entire generation was mesmerised. And then she disappeared from public memory, as if she had never been there.

Sandhya Cinema is now SRS Cinema. Vasundhara Cinema, where Nadiya Ke Paar, the original Hum Aapke Hain Koun, ran for all of 52 weeks, has been broken down and in its place stands a tower.

Capitalism has killed all the places where I built the best memories of my growing up years.

Of course, like any other small city in India, Ranchi had a couple of theatres which only showed adult movies; Mini Sujata and Plaza. While, for an average Indian, roti, kapada aur makaan, still remains an issue, we have no such problems when it comes to cheap bandwidth. Watching porn, which used to be a community activity in a public space, is a very individual activity carried out in the privacy of a home. Ranchi is no different on that front.


I walk out of Carnival Cinema, on to Ranchi’s main road, which is rather imaginatively called, the Main Road (The official name of the road is Mahatma Gandhi road,  but try asking for directions using that name).

Right opposite Carnival Cinema stands GEL Church Shopping Complex. Back in the 1990s, this was closest that Ranchi had to a mall. Rather ironically, it was owned by the Church (the Gossner Evangelical Lutheran (GEL) Church to be very precise). It’s here that I was hanging out sometime in 1995 or 1996 perhaps, that I discovered Altaf Raja singing Tum to Thehre Pardesi.

A cassette shop was playing the song in a loop. When I got into the shop to buy the cassette, I was told there was huge demand for the cassette and hence, it was selling at a premium, in black. I paid Rs 25 for a twenty rupee cassette.  There’s nothing to be surprised about here, we were still in the 1990s, when, even music cassettes sold in black.

Ranchi had a whole host of cassette shops at that point of time with Chawla Radio being one of the most famous of the lot. Of course, no one buys cassettes or for that matter music anymore. And the record for Tum to Thehre Pardesi being the highest selling non-film Hindi album of all time, still stands. Many of the erstwhile cassette shops have either shutdown or moved on to selling electronic products, everything from TVs to mobile phones. The free market has been at work.


The GEL Church Shopping Complex housed Ranchi’s most famous restaurant Kaveri. I walk into the restaurant and order an American Choupsey and a Paneer Chilli, dishes that I used to feast on, back in the 1990s. The Paneer Chilli is still as divine as it used to be. It will be fair to say, I have eaten better American Choupsey at other places, since then.

While Kaveri is still going strong and even has branches, there are other popular restaurants which have sprung up in the city. A small survey among the locals tells me that the Yellow Sapphire, Breaking Bread, Nirvana and Prana, are quite popular in the city these days.

The other thing that has happened on the food front, is the rise of branded Litti and Chokha stalls, led by the famous Bhola Litti, an eating joint many of my friends swear by. Bhola’s litti is made in ghee and the dough is mixed with curd to soften it. With this, what used to be poor man’s food has been turned into a middle class delight. What do they say about India and jugaad?

Also, Ranchi has proper shopping malls these days, with the Nucleus Mall being the most popular mall of them all.

The city barely had a culture of eating out in the 1990s. Things have changed on this front. The economic growth since 1991 has clearly helped. But more than that Ranchi becoming the capital of the state of Jharkhand in 2000, has played a greater role.
This has had other benefits as well than just people earning more and eating out more often. The roads in the city are much better than they used to be.

I grew up on Kanke Road, the road which ultimately ends in Kanke, where the Central Institute of Psychiatry, Ranchi’s famous mental asylum is located. The road used to be full of potholes and a section of the road was famously referred to as Kharkhardiya Chowk, for the infinite-number of potholes it used to have. All that has disappeared now.

The highway to Patratu, of which Kanke Road is a part, can give any national highway a run for its money on the quality front, and so can the beauty of the drive. The city now also has a ring road to ease the traffic congestions within the city. Old timers say that it used to be possible to move from one end of Ranchi to another in 20-30 minutes. Now it can even take up to two hours. The traffic and the city have both expanded.

The power situation in the city has also improved considerably. The story that one used to here in the 1990s was that the power produced in the power plants of Jharkhand was largely transmitted to north Bihar (now just Bihar). Now the city gets its fair share of power.

The Ranchi I grew up in was constantly facing load shedding. In May 1992, the city saw a 15-day power cut. The power lines from the Patratu Power Plant which supplied power to the city were pulled down due to strong winds and it took more than two weeks for the situation to come back to normal.


I soon see a Café Coffee Day (CCD), in the Capitol Hill building, right opposite where the Ratan Cinema, another single screen theatre, used to be.

A quick Google search tells me Ranchi now has six CCDs. At least, for those who can spend money, dating and hanging out with friends, is now easier. When I was a student of St. Xavier’s College, hanging out meant standing in front of the tea stall outside college, having tea and smoking (for those who did) and watching the world pass by.

Of course, we had ample time back then to waste, with the Ranchi University session running a year late, and a three year graduation taking four years to complete. Ranchi University now largely runs on time. This is yet another benefit of the state of Jharkhand being carved out of Bihar.

Before, the situation started to deteriorate in the mid 1980s, Ranchi was the original Kota, sending many students to the IITs, vis a vis its size. The story goes that in the year 1983, 73 students from St. Xavier’s College made it to the IITs. This was a time, when there were just five IITs. The city was clearly punching above its weight. The IIT baton passed from Xavier’s to DAV Jawahar Vidya Mandir (now just Jawahar Vidya Mandir), with many students from the school regularly qualifying for the IITs, through the 1990s. The trend continues.


I continue walking on Main Road, and see many of Ranchi’s iconic shops, from Ved Textiles to Jevar Jewellers to Frontier Fruitstore to Punjab Sweethouse to Wool House.

They all continue to be in existence. Except for perhaps Frontier Fruitstore, they have all had to slightly rejig their business models over the years to continue to be in existence. Take the example of Wool House. This was the shop women went to buy wool to knit sweaters, as did my mother, my grandmother and my aunt. Of course, no one knits sweaters anymore. So, no one buys wool anymore. Wool House, now sells everything from T-Shirts to sweaters to blankets.

Fine Tailoring, the tailoring shop my father and my maternal grandfather swore by, also continues to be in existence. But along with the old there is the new. Big Bazaar, Shoppers Stop, Manyavar, Pantaloons etc., all have a presence in Ranchi. And that’s another benefit of becoming a state capital. The choice available to people has clearly gone up.

But Ranchi continues to be weak on the industry front, though things seem to be gradually changing. The current chief minister Raghubar Das is betting on making Ranchi a textile hub. Arvind Ltd. has a factory in Ranchi.

Also, Ranchi has a software park (STPI), where business are being established. Having said that the IT industry in Ranchi is at its very nascent stage. This is surprising given that the city has excellent weather and a reasonably good education system in place.
But on the whole, like many other cities of its size, Ranchi remains a city where consumption drives consumption. In that sense, the service sector has expanded in the city over the last two decades, with jobs being created in the banking, insurance and retail sector.

Other than this, Ranchi continues to have offices of public sector companies like Central Coalfields Ltd., Central Mine Planning and Design Ltd., Mecon Ltd., Steel Authority of India Ltd., and Heavy Engineering Corporation (HEC). HEC, which used to be the big PSU operating out of Dhurwa, on the outskirts of Ranchi, has shrunk in size over the years. The turnover of the company was around Rs 683 crore as of 2012-2013. It has since shrunk to Rs 399 crore as of March 2018.


As I keep walking on the Main Road another major change really hits me in the face. The cycle rickshaws have more or less gone and have been replaced by the Chinese e-rickshaws. The rickshaw pullers are rickshaw pullers because they can’t do anything else. And now they can’t even pull rickshaws. I am not being a Luddite here but changing technology does push out a generation or two out of business, something we really can’t do much about.

My walk ends at Firayalals, Ranchi’s most visible landmark, right opposite the Albert Ekka Chowk. Firayalals’ was Ranchi’s original Shoppers Stop, where people went to buy clothes of different kinds. But more importantly, it had two shops selling softy, right at its entrance, Fun n Food and Vishnees.

I have somehow always favoured Vishnees. I order a chocolate softy. In my mind, it is the best softy I have ever had. Only when I start eating it, do I realise it’s probably a vanilla softy mixed with some chocolate powder. But the nostalgia at that moment is so strong that I am in no position to throw the softy and end up licking it to my complete satisfaction. Even a Häagen-Dazs ice cream could not have provided me with the same satisfaction at that moment.

As I stand at Firayalals, I can see the Paramveer Chakra winner Albert Ekka’s statue before me. It’s around five thirty in the evening. The sun has set. And it’s gradually getting dark. The traffic is at its worst. Scooters. Motorcycles. Cars. Chinese e-rickshaws. All mixed up.

From the corner of my eye, on the left hand side of Ekka’s statue, I see a hoarding featuring Mahindra Singh Dhoni advertising one of the many brands that he does.

Ranchi has changed in many ways over the last twenty years. I have talked about better roads, better power, and probably even more job opportunities, with the rise of the private sector. But Ranchi’s biggest change in two decades has been Dhoni.

When I left the city in 1999, the world hadn’t heard about him. I had. But I had no idea that he would become the legend he eventually did. A city which was largely known for its mental asylum and for being a quasi-hill station for the Bengali Bhadralok, was put on the World Map, by a freak who batted, kept and captained, the way he did.
And a freak like Dhoni, could have only come up in a city like Ranchi, which loved cricket,  but barely had any conventional cricket coaching available, ensuring he kept batting the way he did.

Dhoni has been Ranchi’s biggest change in the last twenty years. Without him doing what he did, I wouldn’t be writing this piece. And India would have lost out on so much pleasure,  without him bursting on to the scene.

(Vivek Kaul is the author of the Easy Money trilogy. He was born and brought up in Ranchi.)

Will Low Inflation Spur the RBI to Cut the Repo Rate?

credit deposit ratio                                                   Source: Reserve Bank of India

In December 2018, consumer price inflation came in at an 18-month low of 2.19%. After this, the government expects the monetary policy committee (MPC) of the Reserve Bank of India (RBI) to cut the repo rate when it meets next, in early February.  Repo rate is the interest rate at which RBI lends to banks.

Why does the government expect the RBI to cut the repo rate?
The finance minister Arun Jaitley recently said: “We can’t have real interest rates higher than anywhere in the world”. Real interest rates are basically interest rates adjusted for inflation. If the interest rate on a one year fixed deposit is 6.8%, then the real interest rate works out to 4.61% (6.8% interest minus 2.19% inflation). The government hopes that once the RBI cuts the repo rate, the banks will cut their deposit rates and their lending rates as well. At lower interest rates people will borrow and spend more, companies will borrow and expand. This will benefit the economy.

What’s the problem with this argument?
A major reason why consumer price inflation has been low is because of low food inflation In December 2018, it was in a negative territory (-2.51%). RBI has no control over food inflation. Given this, let’s look at just core inflation (inflation after leaving out food and fuel items). In December 2018, it stood at 5.48%. If we take this rate of inflation into account, then the real rate of interest no longer remains one of the highest in the world, as the finance minister had said. It is at 1.32% (6.8% interest minus 5.48% inflation).

So, basically inflation exists beyond food items?
In December 2018, housing prices went up by 5.32%. Health costs were up 9.02%, whereas education costs went up by 8.38%.

Let’s say the MPC cuts the repo rate, will banks pass on the cut?
Take a look at the accompanying chart. The credit deposit ratio (non-food credit) of banks as on January 4, stood at 77%, after peaking at 77.9%, a fortnight before. Basically, once we take into account a statutory liquidity ratio of 19.25% (the proportion of deposits a bank needs to invest in government securities) and the cash reserve ratio of 4% (the proportion of deposits a bank needs to maintain with the RBI), the banks are already lending out their deposits full tilt.

Which are the sectors leading the lending?
In November 2018, lending to the services sector went up 28.1%, whereas lending to retail went up 17.20%. Even industrial lending growth hit a two-year high of 4%, with lending to medium-level industry growing 11%. Sector wise details are available only up to November. The growth rates in December would have been even faster. In this scenario, banks will need more deposits to keep funding the increase in lending. So, are they really in a position to cut interest rates?

This originally appeared in the Mint on January 21, 2019.


India’s Population Bomb and the Surprising Truth Behind It

indian flag
Debates on many issues in India, ultimately boil down to India’s huge population.
During the course of such debates, many educated Indians feel that India’s population is responsible for a bulk of its problems and needs to be controlled.

They are unable to distinguish between India’s huge population and the need to control it. Allow me to explain.

As per the National Health Survey of 2015-2016, the fertility rate in India stood at 2.2. This basically means that on an average 1000 women have 2,200 children, during their child-bearing years. In 1981, it was at 4.5. In 2001, it was 3.1. Slowly but steadily, things have improved on this front.

People have fewer children once they see their children survive. The infant mortality rate, or the number of infants who die before reaching one year of age for every 1,000 live births during the course of a given year, has been falling. In 2016, the infant mortality rate in India stood at 34. In 1996, this had stood at 75.

As Hans Rosling, Ola Rosling and Anna Rosling Rönnlund write in Factfulness—Ten Reasons We’re Wrong About the World – And Why Things Are Better Than You Think: “Parents in extreme poverty need many children… for child labour but also to have extra children in case some children die… Once parents see children survive, once the children are no longer needed for child labour, and once the women are educated and have information about and access to contraceptives, across cultures and religions both the men and the women instead start dreaming of having fewer, well-educated children.”

In the Indian case, while we can debate the well-educated bit, surely parents are having fewer children.

As mentioned earlier, the fertility rate in India stood at 2.2 in 2016. Not surprisingly, poorer states like Uttar Pradesh, Bihar, Rajasthan and a few states in the North-East, have higher fertility rates. These states also have high infant mortality rates.

As the Roslings write: “Every generation kept in extreme poverty will produce an even larger next generation. The only proven method for curbing population growth is to eradicate extreme poverty and give people better lives, including education and contraceptives. Across the world, parents then have chosen for themselves to have fewer children. This transformation has happened across the world but it has never happened without lowering child mortality.”

As the National Health Survey points out: “Women with no schooling have an average 3.1 children, compared with 1.7 children for women with 12 or more years of schooling.”
The replacement rate or the level of fertility of women at which the population automatically replaces itself, from one generation to the other, typically tends to be at 2.1.

Further, given India’s high infant mortality rate, in comparison to the developed countries, the fertility rate is perhaps already at the replacement level.

In fact, the fertility rate in urban India is at 1.8, whereas in rural India, it is 2.4.  Interestingly, as the National Health Survey points out: “Twenty-three states and union territories, including all the states in the south region, have fertility below the replacement level of 2.1 children per woman.”

The broader point here is that India is close to stabilising its population. Of course, this is not going to happen overnight and will take a few decades to pan out. As per the National Population Policy of 2000, India’s population should stabilise at 145 crore in 2045.

Also, the good thing is that India did not adopt a compulsory one child policy like China did. Given the preference for boys, it would have led to selective abortions, like happened in China. This is not to say that selective abortions don’t happen currently, but the situation would have been even worse.

The sex ratio at birth in 2016 was 940 females to a 1000 males. With a one child policy, the sex ratio would have been lower than its current level. And this would have had other repercussions.

To conclude, while India has a huge population, we have clearly reached a stage where the population will stabilise in the next few decades.

The column originally appeared in the Bangalore Mirror on April 25, 2018

Why Indians Love Govt Jobs

Indian Railways, the country’s largest employer, recently advertised for 90,000 vacancies. It got over 2.8 crore applications for it.

My calculations suggest that the number of applicants is around one-fifth of India’s youth workforce, which is actually looking for a job.

Nearly two lakh people applied for 1,137 constable vacancies in Mumbai Police. A newsreport suggests that this included 167 MBAs, 423 Engineers and 543 postgraduates. There were 3 individuals with an LLB and 167 individuals with a Bachelors in Business Administration, on the list.

Sometime back,129 engineers, 23 lawyers, a chartered accountant and 393 postgraduates in arts, were among the 12,453 individuals who were interviewed for the job of a peon, in the Rajasthan Assembly Secretariat. In total, 18 posts were to be filled up.

In May last year, nearly 25 lakh individuals wrote the exam for 6,000 Group D posts on offer in the West Bengal government.

There are many other such examples, which have been popping up over the last few years. The moment a government job is advertised, a huge number of people apply for it. The question is why?

India is currently going through a phase, where its working age population is growing at a faster rate than the overall population. This is thanks to the fact that people are having fewer children. Nearly a million Indians are entering the workforce every month. This amounts to nearly 1.2 crore a year, or around two and a half times the population of New Zealand.

This stage in any economy is referred to as the demographic dividend. As people enter the workforce and find jobs, earn and spend, the economy grows at a faster rate than it has in the past, and pulls many people out of poverty.

Of course, this is how things are supposed to happen, in theory.

The fact that so many people are applying for government jobs suggests that there are not enough jobs going around for India’s demographic dividend. This is countered by the idea that not everyone applying for a government job is unemployed.

It is just that we Indians love the security of a government job and hence, the huge number of applicants.

Is that true?

India’s unemployment is best represented by the term underemployment. What does this mean? It means that everyone who is looking for work all through the year, does not find it.

Data from Annual Report on the Employment and Unemployment Survey suggests that only three in five Indians looking for a job all through the year are able to find it. This basically means that 40% of India’s workforce is unable to find work all through the year. We may call this underemployment, but this is nothing but unemployment.

Further, there is a huge amount of disguised unemployment in India’s agriculture sector, which produces around 12% of the gross domestic product, but employs nearly 46% of the workforce. Disguised unemployment essentially means that there are way too many people trying to make a living out of agriculture. On the face of it, they seem employed. Nevertheless, their employment is not wholly productive, given that agricultural production would not suffer even if some of these employed people stopped working.

A bulk of the Indian workforce is employed in the informal sector. Estimates vary from anywhere between 65% to 92%. And these individuals are badly paid. This is something that the government acknowledges as well. As the Economic Survey of 2015-2016 points out: “The informal sector should… be credited with creating jobs and keeping unemployment low. Yet, by most measures, informal sector jobs are much worse than formal sector ones—wages are, on average, more than 20 times higher in the formal sector.”

The point being that informal employment pays badly. The average daily earnings of a casual worker in rural areas in 2011-2012 was Rs 138. In urban areas, it was Rs 173. A regular worker made Rs 298 in rural areas and Rs 445 in urban areas. Now compare this with a worker of a central public sector enterprise, who made Rs 2,005 per day, apart from having a secure job and several other benefits. This basically means that a casual worker working in rural areas made around 6.9 per cent per day of what the worker of a CPSE made in 2011-2012.

There is no reason to believe that this would have changed by now. This clearly explains why Indians love government jobs. It takes away the insecurity of working for the informal sector and at the same time pays much better. Who wouldn’t apply for a government job in such a case?

Let’s look at a little more recent data.

As the Report of the Seventh Pay Commission, released in November 2015, points out: “To obtain a comparative picture of the salaries paid by the government with that in the private sector enterprises, the Commission engaged the Indian Institute of Management, Ahmedabad, to conduct a study. According to the study, the total [monthly] emoluments of a General Helper, who is the lowest ranked employee in the government, is Rs. 22,579, [which is] more than two times the emoluments of a General Helper in the private sector organisations surveyed, at Rs. 8,000-9,500.”

Hence, the IIM Ahmedabad study, “on comparing job families between the government and [the] private/public sector, has brought out the fact that… at lower levels, salaries are much lower in the private sector as compared to government jobs”.

As per the Report on the Employment and Unemployment Survey, nearly two-thirds of self-employed and contract workers, make up to Rs 7,500 per month or Rs 90,000 per year. The per capita income in 2015-2016, for which the above data is valid, was at Rs 1.07 lakh. This basically means that a bulk of India’s non-salaried workforce, earns a significantly lower income than the per capita income.

As far as the salaried workforce is concerned, around 38% of them make up to Rs 7,500 per month. Hence, the salaried part of the workforce is in a much better position. This clearly shows that there is an economic incentive for even the educated lot to apply for low-level government jobs.

India’s underemployment problem can be solved with more job creation in the formal sector, which isn’t happening. As per the Centre for Monitoring Indian Economy, in 2017-2018, Indian companies scrapped projects worth $ 117 billion, which is the highest number ever. 40% of these projects were dropped in the period January to March 2018.

In such a situation, how will formal jobs ever be created?

The Economic Survey summarises it best: “The challenge of creating ‘good jobs’ in India could be seen as the challenge of creating more formal sector jobs.”

The column originally appeared on Firstpost on April 24, 2018.

18,000 Employees of Air India Cannot Hold the Nation to Ransom



Newsreports suggest that 11 Air India unions representing more than 10,000 employees have started a social media campaign with the Save Air India slogan.

The Indian government plans to sell 76% of its stake in the airline. Under the current terms, the buyer needs to give a guarantee that the permanent employees of the airline will not be fired for at least one year.

After that the buyer is allowed to offer a voluntary retirement scheme to the employees.
This condition along with the fact that any prospective buyer has to takeover two-thirds of the Rs 48,447 crore debt (as on March 31, 2017) of the airline, has led to a situation where none of the Indian airlines are interested in buying Air India. (We don’t know about the foreign ones as yet).

Newsreports also suggest that the International Finance Corporation, the private investment arm of the World Bank, is likely to underwrite the debt amount of Air India for the successful buyer of Air India.

It is highly unlikely that any prospective buyer will buy Air India without any arrangement to handle the $7.5 billion debt of the airline (Rs 48,447 crore at $1=Rs 65).

Given how risky and difficult the airline business is, such a huge debt amount can pull down even a currently profitable airline. Also, it is worth remembering here that two out of three mergers that happen, fail.

While, the debt part of the airline can be handled, how the government handles the employees of Air India, is more important.

As on January 1, 2017, the airline had 18,049 employees. In comparison, IndiGo had 14,576 employees as on March 31,2017. IndiGo also employed 8,225 employees on a temporary/contractual/casual basis. Indigo has 40% share in India’s domestic airline business and is a profitable airline. Air India has 12% of India’s domestic market share and has a 17% share in flights in and out of India and it loses money.

How do things look at the employee cost level? The employee benefit expenses of Air India during 2016-2017, stood at Rs 2,558 crore. This worked out to around 11.5% of the total revenue earned during the course of the year.

In comparison, Indigo spent Rs 2,048 crore and this worked out to around 10.6% of the total revenue earned by the airline during the course of the year. Clearly, the employee cost is much more in case of Air India.

Having said that, the difference is not much but can nevertheless be important in a low margin business like airlines are. For any prospective buyer of Air India, one of the easiest ways to control costs, is to get rid of the non-productive part of the employee base.

And any prospective buyer having paid good money to the government would want to employ this strategy. This is a low-hanging fruit, but the current terms of sale don’t allow a prospective buyer to do that.

But such a situation is likely to arise only if the government is able to sell Air India.

Before that, the employee unions are likely to show their nuisance value by making it as difficult as possible for the government to sell Air India. The social media campaign is
just the starting point. The opposition parties are likely to join in as well.

The Congress politician Manish Tewari recently tweeted about what happens if British Airways buys Air India. He went on to ask, “won’t souls won’t souls of millions of Freedom Fighters who sacrificed everything turn in their graves?

This is terribly bad rhetoric, given that British Airways was privatised way back in 1987, but then the Congress party has always liked the idea of the government owning public sector enterprises (This is not to say that the Bhartiya Janata Party doesn’t). The British Airways is just another private airline now and one of the most successful privatisations ever carried out in Britain. So, if British Airways buys Air India, it will be a great thing because the airline has some experience in turning around a government owned airline, and running it profitably over the years.

As far as the employees are concerned, their protests are hardly surprising given that most of them have spent their lifetimes working for a government owned company. The future is unlikely to be as cozy as it is under the current owner and they will make every effort possible to ensure that continues.

But the current owner has spent a lot of taxpayer money to keep this airline going. Between April 2010 and December 2017, the accumulated losses of the airline were at Rs 46,256 crore.

To keep the airline going, the government invested Rs 26,545 crore into the airline since April 2011. Over and above this, the airline has taken on working capital loans from banks, which as on March 31, 2017, stood at Rs 31,088 crore. This basically means that the airline keeps running because of the loans it keeps taking on. The banks are lending to the airline primarily because it is owned by the government, leading to the actual debt of the government going up. They would have long-stopped lending to a privately owned airline in a similar situation.

The larger point being that every extra rupee that the government spends on this airline, is a rupee taken away from something else. Let’s take the case of defence. In fact, Vice Chief of Army Lt Gen Sarath Chand told a Parliamentary panel sometime back that 68 per cent of the Army’s equipment is in the ‘vintage category’. “Funds allocated is insufficient and the Army is finding it difficult to even stock arms, ammunition, spares for a 10-day intensive war. All the three services are expected to be prepared for at least 10 days of intense battle,” he said. This is clearly not a good trend. There are more important
things that India needs to spend money on than Air India.

Also, if the government is serious about genuine privatisation (and not the kind where LIC buys government’s stake in public sector enterprises) of loss making as well as profitable government companies, it is important that the sale of Air India goes through.

If the 18,049 employees of Air India are allowed to hold the country to ransom then so will the employees of other loss-making government-owned companies like MTNL, BSNL and a whole host of other companies, in the days to come.

If the government doesn’t handle the employees of Air India seriously, then the entire idea of selling Air India, was yet another jumla to come out of this government.

This originally appeared on Firstpost on April 16, 2018.