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.
The elections for the next Vice-President of India are underway today. The current Vice President Dr. Hamid Ansari will complete his second five-year term on August 10, which is in a few days. While the BJP-led NDA’s candidate is Mr. Venkaiah Naidu, Dr. Gopalkrishna Gandhi is the joint candidate fronted by 18 opposition parties led by the INC. In this post, we take a closer look at the constitutional mandate and role of the Vice-President of India and how the elections for the post will play out today.
Constitutional mandate as Vice President
The Vice-President is the second-highest constitutional office in India. He acts as the President in the absence of the incumbent President, and is the ex officio Chairman of Rajya Sabha. As an indication of his bipartisanship and apolitical character, the Vice-President does not hold membership of any political party or any other office of profit. Further, given his constitutional stature, the statements given by the Vice President assume national significance. The outgoing Vice President’s statements on issues like press freedom and welfare of minority communities led to several media debates and attracted widespread attention.
Vice-President’s role as Chairman of the Rajya Sabha
As Chairman of Rajya Sabha, the Vice President is the final authority on the interpretation of the Constitution and the Rules of Procedure for all house-related matters. His rulings constitute binding precedent. He also determines whether a Rajya Sabha member stands to be disqualified on grounds of defection. Such powers make him an important stakeholder in the functioning of our parliamentary democracy.
The Vice President is also vested with powers to improve the functioning of the Upper House. There have been several instances where the current Vice President has used his powers to address issues ranging from improving the productivity of question hour, reducing prolonged disruptions, maintaining decorum in the House, to facilitating discussion on issues of national importance.
Addressing disruptions: In March 2010, the Vice President ordered seven MPs to be evicted from the House for causing disruptions during the discussion and passage of the Women’s Reservation Bill. More recently, in December 2015, the Vice President called for an all-party meeting during the last leg of the then ongoing Winter Session to discuss the matter of continuous disruptions in the House. The remaining three days of the session after the all-party meet recorded 79% productivity, while the House had recorded overall productivity of 51% that session.
Functioning of Question Hour: In another instance, in November 2014, the Vice President issued a direction to conduct question hour from 12 noon to 1 pm instead of the originally allocated first hour of the day. This was seen as an attempt to address the issue of low productivity of question hour mostly due to disruptions at the start of the day. However, question hour productivity has not shown any significant improvement yet, with continuing disruptions.
Parliamentary Privilege: Parliamentary privilege refers to rights and immunity enjoyed by Parliament and MPs, which may be necessary to effectively discharge their constitutional functions. When disregarded, the offence is called a breach of privilege and is punishable under law. The Chairman is the guardian of these privileges and can also issue warrants to execute the orders of the House, where necessary. In 1967, one person was held to be in contempt of Rajya Sabha for throwing leaflets from the visitors’ gallery of the House. The then Vice President, in accordance with the resolution of the House, had sentenced the person to simple imprisonment, till the conclusion of that session.
The Chairman’s consent is required to raise a question of breach of privilege. He also has the discretion whether to refer it to the Privileges Committee, and whether to accept the committee’s recommendations. In October 2015, the current Vice President had referred the matter of a member’s controversial “terrorists in Parliament” remark to the Privileges Committee upon receiving complaints from several opposition MPs.
Role in Parliamentary Committees and other institutions
Parliamentary committees review proposed laws, oversee activities of the executive, and scrutinise government’s expenditure. The Vice President nominates members to various Parliamentary Committees, appoints their Chairmen and issues directions to them. The Vice President also nominates members of the Rajya Sabha on various bodies such as the Haj Committee, the Institute of Constitutional and Parliamentary Studies, Courts of several universities such as JNU, etc. He is also on the three-member Committee which nominates the Chairman of the Press Council of India.
So, how is the Vice President elected?
Unlike Presidential elections, MLAs do not have a vote in these elections. Dr. B R Ambedkar had explained why during the constituent assembly debates: “The President is the Head of the State and his powers extend both to the administration by the centre as well as of the states… But when we come to the Vice-President, his normal functions are merely to preside over the Council of States. It is only on a rare occasion, and that too for a temporary period, that he may be called upon to assume the duties of a President”.
Therefore, the Electoral College for the Vice- Presidential elections consists of all 790 MPs. The elections are conducted using the system of single transferable voting that results in (approximately) proportional representation. The voting is done through secret ballot implying that parties cannot issue whips to their MPs and anti-defection laws do not apply.
Each voter has one vote with the same value of 1. Every voter can mark as many preferences, as there are candidates contesting the election. It is necessary for at least the first preference to be marked. A candidate needs to win a required number of votes (or the quota) to be elected. If no one achieves the required quota after the first round of counting the first preference votes, the candidate with the lowest votes is eliminated. His votes are then transferred to the second preference mentioned (if any) on the votes he received. If no one achieves the required quota again, the process is repeated till either:
The upcoming Vice Presidential elections
Let us now determine the quota required for victory in today’s election. The total value of votes of the electoral college is divided by two, and one is added (to ensure a majority) to the quotient to determine the quota. Hence, the quota is calculated as:
Quota = 790/2 + 1 = 395 + 1= 396
The candidate who gets 396 votes will win the election. If no candidate gets to this mark, the second and further preferences may be counted until the mark is reached or all candidates, but one, are eliminated.
We know the number of seats held by each party in Parliament. Let us assume that all MPs vote along their party line. The position of the NDA and UPA is depicted in the figure below at the two ends of the chart. All other major parties and independents are marked in the middle.
We observe that, while the BJP falls short of the quota by 58 votes, the shortfall can be overcome if NDA allies TDP, Shiv Sena, Shiromani Akali Dal, LJP and PDP support its candidate.
With the voting taking place this morning, the outcome and results will become clear by later today. It is hoped that the new Vice President will uphold the twin constitutional mandates as the second highest constitutional functionary and the Chairman of Rajya Sabha, just as his distinguished predecessors have done.
