Whether or not the “subsidy” bill for Air India is raised in Budget 2012, the fact is that the flag carrier’s mounting losses and “revival plans” will have to be accounted for soon enough. At least, partly.
It’s amply clear that Air India is an extravagance the government will hold onto with dear life. Say what you want. It’s equally clear that criticising Air India for its sloth and size is, thus, futile. Moreover, be advised that the sinking airline will continue to devour thousands of crores of taxpayers’ money as well as public sector bank deposits all the way to the blue sky yonder.
Just to refresh everyone’s memory, Air India’s outstanding loans and dues stand at over Rs 67,000 crore, of which over Rs 43,000 crore are just bank loans. Its accumulated losses stand at a little over Rs 20,000 crore. Revenues are around Rs 13,000 crore and the wage bill is Rs 3,000 crore. And there is no real hope in sight, considering that it is not easy to be in the aviation industry in the first place.
Given this, the finance ministry (since it will do the doling out) might have or should arm itself with just one option: ensuring that the right person runs the airline. Of course, it’s a risk to assume that person is appropriate and will turn a company around. But the downsides are limited and the upsides huge.
Now, getting that person has always been a challenge since Air India has mostly been run by supremely unqualified bureaucrats. But with a few minor tweaks in rules, someone more appropriate from within the government can be brought in. And there are qualified and competent managers who might just be the only hope. That is, of course, if they take the job.
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Let’s rewind a little. If you want to understand why many public and state sector undertakings do badly, look no further than Air India’s current CEO. The government-appointed Rohit Nandan, a bureaucrat from the civil aviation ministry with no seeming experience of ever having run a corporation, leave alone an airline, as chairman.
Since his appointment in early August 2011, Nandan has made a few right noises. But that has not helped much. And unsurprisingly, Air India’s miseries have worsened since.
Let’s look at his track record. Over the decade before he joined the aviation ministry (in a bureaucratic role), Nandan’s responsibilities in Uttar Pradesh ranged from running the general administration to the welfare of the disabled and handicapped. And, finally, handling rural development. The table (Qualified enough?) illustrates Nandan’s career path till he became chairman of Air India.
| QUALIFIED ENOUGH? |
Note: the first five positions are in Uttar Pradesh, so Nandan has a total of two years of experience in the aviation sector
So how’s this gentleman trying to save one of the worst (financial) aviation disasters in the world when his experience evidently brings him nowhere even close to such a situation? That’s the question for the government to ask itself and taxpayers to ponder — since you can do little else.
It’s possible that Nandan is a smart bureaucrat who has been unfairly kicked around by vengeful political administrations. But that, too, does not wash when it comes to being the chosen one trying to save a near-sunk corporation. Let’s admit it. Someone like him can neither perspire suitably nor inspire appropriately. Unless someone thought Nandan’s one-year Masters in Business Administration from the University of Hull in 2000 qualified him for the job.
So what can the government do? One is to bring in someone from the private sector. And there was now ITC Chairman Yogi Deveshwar as Air India chairman in the mid-nineties. But that approach won’t work for a government hell bent on total control. A private sector CEO could come when there is a change in ownership, a proposition that’s not on the table at present.
The answer is simple. The best suitors are within India’s public sector. These are managers who run real businesses in real market conditions. Most C-suite executives in the state-owned oil and power companies (Oil and Natural Gas Corporation, Indian Oil Corporation and NTPC Limited) qualify. Some public sector bank chiefs bring considerable spunk to the table too. As do some managers in the Indian Railways. And we all know of E Sreedharan.
Hang on. Is this an argument that career bureaucrats (as opposed to public sector undertakings managers) are by definition incompetent to run corporations? Far from it. First, there are a few who succeed in doing good work with state-level corporations. But their median track-record is disastrous, as a study of the finances of any state’s public sector undertakings will show. And you can’t allow more experimentation with taxpayers’ money in cases like Air India, as we merrily have.
On the other hand, there are several bureaucrats who have run “corporations” successfully too, including later in the private sector. R C Bhargava and Jagdish Khattar are good examples. Both joined car maker Maruti Udyog (now Maruti Suzuki) in the role of director (marketing) before going on to head it. Bhargava was earlier director at Bharat Heavy Electricals, while Khattar held CEO’s position in several state-level corporations and India’s Tea Board.
So, if you want to move from a government administrative function to a corporate, business role and function, start a little lower. Air India is a classic case in which the totally unqualified usually land up right at the top. And then grope around. The result of this approach for the last few decades is clear for all to see.
The Government of India must put aside internal turf battles and put in place leadership with business experience. Of course, then comes the issue of giving a free hand. That’s altogether a different battle. But someone from halfway within the system will fight it well. Or has a better chance. And could still achieve something. Many of the state-owned oil and bank chiefs have demonstrated that quite well. And then there is E Sreedharan.
The author is Founder & Trustee: www.Indiaspend.org, a foundation that creates data awareness & tracks government expenditure