Recently there have been news reports about the NITI Aayog submitting its recommendations on improving the financial health of Air India to the Ministry of Finance.[1],[2] The Civil Aviation Ministers have also mentioned that the Ministry will soon propose a roadmap for the rejuvenation of the national airline. While the NITI Aayog report is not out in the public domain yet, we present a few details on the financial health of the airline.
Finances of Air India
In 2015-16, Air India earned a revenue of Rs 20,526 crore and registered losses of Rs 3,837 crore. As of March 31, 2015, the total debt of Air India was at Rs 51,367 crore.[3] This includes Rs 22,574 crore outstanding on account of aircraft loans. The figure below shows the losses incurred by Air India in the last few years (2007-16).
According to the Ministry of Civil Aviation, reasons for Air India’s losses include: (i) the adverse impact of exchange rate variation due to the weakening of Indian Rupee, (ii) high interest burden, (iii) increase in competition, especially from low cost carriers, and (iv) high fuel prices.[4] The National Transport Development Policy Committee (NTDPC), in its report in 2013, had observed that with the increase in the number of airlines in the market, Air India has been struggling to make a transition from a monopoly market to a competitive one.[5] These struggles have been primarily regarding improving its efficiency, and competing with the private airlines.
Turnaround Plan and Financial Restructuring
In order to bail out the company, the government had approved the Turnaround Plan (TAP) and Financial Restructuring Plan (FRP) of Air India in April 2012.[6] Under the plans, the government would infuse equity into Air India subject to meeting certain milestones such as Pay Load Factor (measures capacity utilisation), on time performance, fleet utilisation, yield factor (average fare paid per mile, per passenger), and rationalisation of the emolument structure of employees.7 The equity infusion included financial support towards the repayment of the principal, as well as the interest payments on the government loans for aircraft acquisition. Under the TAP/FRP, the central government was to infuse Rs 30,231 crore till 2020-21. As of 2016-17, the Ministry has infused an equity amount of Rs 24,745 crore.[7]
In 2017-18, the Ministry has allocated Rs 1,800 crore towards Air India which is 67% of the Ministry’s total budget for the year.[8] However, this amount is 30% lower than the TAP commitment of Rs 2,587 crore.3 In 2016-17, while Air India had sought and equity infusion of Rs 3,901 crore, the government approved Rs 2,465 crore as the equity infusion.[9] The Standing Committee on Transport, Tourism, and Culture examining the 2017-18 budget estimates noted that reducing the equity infusion in Air India might adversely affect the financial situation of the company.[10] It recommended that the government must allocate the amount committed under TAP. The Ministry had also observed that due to reduction of equity infusion, Air India has to arrange funds through borrowing which costs additional amount of interest to be paid by the government.[11]
As per the Ministry, Air India has achieved most of the targets set out in TAP.[12] Despite running into losses, it achieved an operating profit of Rs 105 crore in FY 2015-16.[13] Air India’s performance in some of the segments are provided in the table below.
Table 1: Air India’s performance
| 2011-12 | 2014-15 | |
| Overall Network On Time Performance (measures adherence to time schedule) | 68.2% | 72.7% |
| Passenger Load Factor (measures capacity utilisation of the airline) | 67.9% | 73.7% |
| Network Yield achieved (in Rs/ RPKM)* | 3.74 | 4.35 |
| Number of Revenue Passengers (in million) | 13.4 | 16.9 |
| Operating Loss (in Rs crore) | 5,139 | 2,171 |
* Note: RPKM or Revenue Passenger Kilometre performed refers to number of seats for which the carrier has earned revenue.
Sources: Lok Sabha Questions; PRS.
The NTDPC had observed that with its excessive and unproductive manpower, failure to invest in the technology required to keep it competitive, and poor operations, Air India’s future looks risky. It had also questioned the rationale for a national airline. It had suggested that the government must frame a decisive policy with regard to Air India, and clarify its future accordingly.5 It had recommended that Air India’s liabilities should be written off and be dealt with separately, and the airline should be run on complete operational and financial autonomy.5
Need for competitive framework in the sector
With the entrance of several private players in the market, the domestic aviation market has grown significantly in the last decade. The market share of an airline is directly related to its capacity share in the market. While private carriers have added capacity in the domestic market, the capacity induction (adding more aircrafts) of Air India has not kept up with the private carriers. This has resulted in decrease in market share of Air India from 17% in 2008-09 to 14% in 2016-17.[14]
The Committee looking at the competitive framework of the civil aviation sector had observed that the national carrier gets preferential treatment through access to government funding, and flying rights.[15] It had recommended that competitive neutrality should be ensured between private carriers and the national carrier, which could be achieved by removing the regulations that provide such preferential treatment to Air India. The NTDPC had also noted that the presence of a state-owned enterprise should not distort the market for other private players.6 It had recommended that the Ministry should consider developing regulations that improve the overall financial health of the airline sector.
While Air India’s performance has improved following the TAP, along with the equity infusion from government, its debt still remains high and has been gradually increasing. In light of this, it remains to be seen what the government will propose with regard to the rejuvenation of the national airline, and ensure a competitive and fair market for all the players in the airline market.
[1] “Govt to prepare Air India revival plan within 3 months, amid calls for privatization”, Livemint, May 31, 2017, http://www.livemint.com/Politics/0koi5Hyidj1gVD3wOWTruM/Govt-says-all-options-open-for-Air-India-revival.html.
[2] “Air India selloff: Fixing airline’s future is more important than past”, Financial Express, May 31, 2017, http://www.financialexpress.com/opinion/why-fixing-air-indias-future-more-important-than-past/693777/.
[3] Lok Sabha Questions, Unstarred question no 382, Ministry of Civil Aviation, February 25, 2016, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=28931&lsno=16.
[4] Lok Sabha Questions, Unstarred question no 353, Ministry of Civil Aviation, November 17, 2016, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=40733&lsno=16.
[5] “Volume 3, Chapter 3: Civil Aviation”, India Transport Report: Moving India to 2032, National Transport Development Policy Committee, June 17, 2014, http://planningcommission.nic.in/sectors/NTDPC/volume3_p1/civil_v3_p1.pdf.
[6] “Government Approves Financial Restructuring and Turn Around Plan of Air India”, Press Information Bureau, Cabinet Committee on Economic Affairs (CCEA), April 12, 2012, http://pib.nic.in/newsite/PrintRelease.aspx?relid=82231.
[7] Lok Sabha Questions, Unstarred question no 472, Ministry of Civil Aviation, April 6, 2017, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=51752&lsno=16.
[8] Notes on Demands for Grants 2017-18, Demand no 9, Ministry of Civil Aviation, http://indiabudget.nic.in/ub2017-18/eb/sbe9.pdf.
[9] Lok Sabha Questions, Unstarred question no 4809, Ministry of Civil Aviation, March 30, 2017, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=51108&lsno=16.
[10] “244th report: Demand for Grants (2017-18) of Ministry of Civil Aviation”, Standing Committee on Transport, Tourism and Culture, March 17, 2017, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20Transport,%20Tourism%20and%20Culture/244.pdf.
[11] “218th report: Demand for Grants (2015-16) of Ministry of Civil Aviation”, Standing Committee on Transport, Tourism and Culture, April 28, 2015.
[12] Lok Sabha Questions, Unstarred question no 307, Ministry of Civil Aviation, February 25, 2016, http://164.100.47.190/loksabhaquestions/annex/7/AU307.pdf.
[13] Lok Sabha Questions, Unstarred question no 1566, Ministry of Civil Aviation, March 9, 2017, http://www.loksabha.nic.in/Members/QResult16.aspx?qref=47532.
[14] Lok Sabha Questions, Unstarred question no 312, Ministry of Civil Aviation, March 23, 2017, http://164.100.47.194/Loksabha/Questions/QResult15.aspx?qref=49742&lsno=16.
[15] Report of the Committee Constituted for examination of the recommendations made in the Study Report on Competitive Framework of Civil Aviation Sector in India, Ministry of Civil Aviation, June 2012, http://civilaviation.gov.in/sites/default/files/moca_001870_0.pdf.
In India, children in the age group of 6-14 years have the right to free and compulsory elementary education in a neighbourhood school under the Right of Children to Free and Compulsory Education (RTE) Act, 2009. This covers primary (classes 1-5) and upper primary (classes 6-8) levels, which collectively constitute elementary education.
Amongst several provisions focused on elementary education, the Act provides for the No Detention Policy. Under this, no child will be detained till the completion of elementary education in class 8. The RTE (Second Amendment) Bill, 2017, introduced recently, revisits the No Detention Policy. In light of this, we discuss the No Detention Policy and issues affecting the implementation of RTE.
What is the No Detention Policy?
The rationale for the No Detention Policy or automatic promotion to the next class is minimising dropouts, making learning joyful, and removing the fear of failure in exams.[1] The evaluation mechanism under the Policy is the Continuous and Comprehensive Evaluation (CCE) for holistic assessments (e.g., paper-pencil test, drawing and reading pictures, and expressing orally) as opposed to the traditional system of examinations. CCE does not mean no evaluation, but it means an evaluation of a different kind from the traditional system of examinations.
What does the RTE (Second Amendment) Bill, 2017 propose to do?
The Bill proposes a ‘regular examination’ which will be held in class 5 and class 8 at the end of every academic year.[2] In the event that a child fails these examinations, he will be given remedial instruction and the opportunity for a re-examination.
If he fails in the re-examination, the central or state governments may choose: (i) to not detain the child at all, or (ii) to detain the child in class 5, class 8, or in both classes. This is in contrast to the current Policy where a child cannot be detained until the completion of class 8.
Conversation around the No Detention Policy
Following the implementation of the No Detention Policy, experts have recommended rolling it back partially or fully. The reasons for this reconsideration include: (i) the lack of preparedness of the education system to support the Policy, (ii) automatic promotion disincentivising children from working hard, (iii) low accountability of teachers, (iv) low learning outcomes, and (iii) the lack of proper implementation of CCE and its integration with teacher training.1,[3],[4]
In 2015, all the states were asked to share their views on the No Detention Policy. Most of the states suggested modifications to the Policy in its current form.
What do the numbers say?
Consequent to the enactment of RTE, enrolment has been 100% at the primary level (see Figure 1). While enrolment has been universal (100%) at the primary level, low transition of students from one class to another at progressively higher levels has been noted. This has resulted in high dropouts at the secondary education level, with the highest dropout rate being 17% at the class 10 level (see Figure 2).
Figure 1: Enrolment in elementary education (2005-2014)
One of the reasons for low dropouts at the elementary level may be the obligation to automatically promote and not detain children under the No Detention Policy. However, there is no such obligation on the government to provide for the same post class 9 i.e., in secondary education. The reasons which explain the rise in dropouts at the secondary level include domestic activities for girls and economic activities for boys, reasons common to both include financial constraints and lack of interest in education.[5]
Figure 2: Dropout rates in school education (2014-15)
How does RTE ensure quality education?
Based on the high enrolment and low dropout rates in elementary education, it can be inferred that children are being retained in schools for longer. However, there have been some adverse observations regarding the learning outcomes of such children. For example, the Economic Survey 2015-16 pointed out that only about 42% of students in class 5 (in government schools) are able to read a class 2 text. This number has in fact declined from 57% in 2007.[6] The National Achievement Survey (2015) for class 5 has also revealed that performance of students, on an average, had gone down from the previous round of the survey conducted in 2014.[7]
Key reasons attributed to low learning levels are with regard to teacher training and high vacancies.7,[8],[9] Against a total of 19 lakh teacher positions sanctioned under Sarva Shiksha Abhiyan in 2011-12, only 12 lakh were filled. Further, approximately 4.5 lakh untrained teachers were operating in 19 states. Teacher training institutes such as District Institutes of Education and Training are also experiencing high vacancies with regard to trainers who train teachers.[10]
It has also been noted that the presence of contract/temporary teachers, instead of permanent teachers, contributes to the deterioration of quality of education. In fact, experts have recommended that to ensure quality secondary education, the reliance on contract/temporary teachers must be done away with. Instead, fully qualified teachers with salary and benefits must be hired.[11] It has also been recommended that teachers should not be burdened with ancillary tasks of supervising cooking and serving of mid-day meals.10
The RTE Act, 2009 sought to ensure that teachers acquire minimum qualifications for their appointment, within five years of its enactment (i.e. till March 31, 2015). Earlier this year, another Bill was introduced in Parliament to amend this provision under the Act. The Bill seeks to extend this deadline until 2019.
In sum, currently there are two Bills seeking to amend the RTE Act, which are pending in Parliament. It remains to be seen, how they impact the implementation of the Act going forward.
[1] “Report of CABE Sub Committee on Assessment on implementation of CCE and no detention provision”, 2015, Ministry of Human Resource Development, http://mhrd.gov.in/sites/upload_files/mhrd/files/document-reports/AssmntCCE.pdf
[2] The RTE (Second Amendment) Bill, 2017.
[3] Change in No-Detention Policy, Ministry of Human Resource Development, March 9, 2017, Press Information Bureau.
[4] Unstarred question no. 1789, Ministry of Human Resource Development, Rajya Sabha, December 1, 2016.
[5] “Key Indicators of Social Consumption in India: Education”, NSS 71st Round, 2014, http://mail.mospi.gov.in/index.php/catalog/160/related_materials
[6] Economic Survey 2015-16, Ministry of Finance, http://indiabudget.nic.in/budget2016-2017/es2014-15/echapter-vol2.pdf
[7] National Achievement Survey, Class V (Cycle 3) Subject Wise Reports, 2014, http://www.ncert.nic.in/departments/nie/esd/pdf/NationalReport_subjectwise.pdf
[8] “253rd Report: Demands for Grants 2013-14, Demand No. 57”, Department of School Education and Literacy, Standing Committee on Human Resource Development, April 26, 2013, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20HRD/253.pdf
[9] “285th Report: Action Taken Report on 250th Report on Demands for Grants 2016-17”, Department of School Education and Literacy, Standing Committee on Human Resource Development, December 16, 2016, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20HRD/285.pdf
[10] “283rd Report: The Implementation of Sarva Shiksha Abhiyan and Mid-Day-Meal Scheme’, Department of School Education and Literacy, Standing Committee on Human Resource Development, December 15, 2016, http://164.100.47.5/newcommittee/reports/EnglishCommittees/Committee%20on%20HRD/283.pdf
[11] “Report of the CABE Committee on Girls’ education and common school system”, Ministry of Human Resource Development, 2005, http://mhrd.gov.in/sites/upload_files/mhrd/files/document-reports/Girls%20Education.pdf
